I'm an intern at a company and one of our tasks is to calculate the the probability of default of both participants of a Swap(a Client and a Bank), for which we first need the correlation coefficient in order to use copulas.

How can we historically simulate the value of said correlation?

However our client doesn't want to provide us with the cash flows: only Expected Exposures, Interest Rates and Credit Spreads, and..we really don't know how to estimate those correlations, specially because they don't want us to use any MonteCarlo simulation or so...

Anyways thank you!

  • 1
    $\begingroup$ Why do you need details of the swap? You are trying to calculate prob (bank default and client default). This is a question of credit analysis of client and bank. $\endgroup$
    – dm63
    Commented Oct 10, 2019 at 23:59
  • $\begingroup$ It means the client wants you to use the credit triangle relationship - for some reasons $\endgroup$
    – Vitomir
    Commented Oct 11, 2019 at 8:12


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