New models and valuation methods for portfolio credit derivatives

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Portfolio credit derivatives provide a mechanism to simultaneously transfer credit exposures to a large number of counterparties within a single transaction. However, no generally accepted valuation model for such credit portfolios is currently available. This project aims to develop new mathematically-based technologies to allow institutions such as Westpac (the Industry Partner) to optimally manage their credit exposures. The outcome will be a class of superior models and operational risk management tools that will ensure the value and risks of these transactions are properly understood and accurately quantified. These models will enhance both the knowledge base of the industry and academic scholarship.