In this paper in equation 15 on page 261 dealing with one factor copula model, one is using creditworthiness indicator as one of a variables. It is defined as
\begin{equation} Y_c = \sqrt{\rho_c} Z + \sqrt{1-\rho_c} \epsilon_c \end{equation} where Z is a systematic factor influencing default an it is standard normal distributed. Can one make it clearer and let me know what Z should be? Can we take credit spread (and implicitly assume spread is normally distributed?)
