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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?)

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Looks like this paper might be helpful

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