Default Correlation With Copula Method

Corporate default correlation is a correlation between some connected corporates and the default value between zero to one. Copula approach is important for the research of defaults.It is known that the limit of default correlations as maturity decreases to zero can be expressed via the parameter of upper tail dependence of the specific copula. On the basis of previous studies, this paper aims for the industries of construction,real estate and manufactur,discusses the applic-ation of Archimedean Copula to the same industry and different sectors. This paper use the soft-ware of Matlab,C++ and Spss to analyse the statistics of corporates,then find the best fitted Archimedean copula is the fourteenth one.For the nature of the Archimedean copula,this paper treat the upper tail correlation as the default value. And then,this paper from the macro view,the same methods are used to analyse the real estate figure,construction figure and manufacture figure,the best fitted Archimedean copula is also the fourteenth one. With this,this paper gets that the best fitted functions to the corporates with certain correlation are classified to two,the one is the fourteenth Archimedean copula.The generator of Exchangeable Archimedean Copula has a good nature,with this,this paper use the algorithm of Marshall,Olkin and the formula of default probability,do the program to discuss the default correlation.This paper treat the Dalong real estate and WanKe-A real estate for the example.Because we have got that the best fitted Archimedean copula to these is the fourteenth one,then we do the simulation,and with the simulation statistics,we get the distributions.Having got the distributions,the default coreelation is achieved.