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3

You should consider the stages of the default process instead of a binary "default", where there are various points the borrower is able to cure the loan. In a traditional credit model, the general process is to predict the state of the loan and then predict transitions between stages over the life of the loan. This is done by simulating macro variables (...


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Suppose your (first) Quarter on Quarter growth rate was 3% and that spanned 3 months and you want to know how much each month grew. That is you want to know the growth rate for Jan, Feb and Mar, call them $\alpha, \beta, \gamma$. The only information you have is that: $(1+\alpha)(1+\beta)(1+\gamma) = 1 + 3\%$ This is one equation for 3 unknowns and ...


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You can choose an empirical issue. Given the short period available to complete your Master Thesis, introducing a new pricing method and do something never done before is quite challenging. However you can use your knowledge to examine an empirical issue. For instance, the hedging efficiency for a certain product, the connection of credit risk with firm ...


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For the first part looks quite obvious, since independence implies that the covariance is zero and since the correlation is just the covariance divided by the product of the standard deviations, it will be zero, too. $$\text{Cov}(W_t,W_t^\prime)=\mathbb E [W_t,W_t^\prime]-\mathbb E [W_t]\mathbb E[W_t^\prime]$$ By law of iterated expactation $$\mathbb E [W_t,...


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