Why is the Gaussian Copula model so widely used in the financial industry to price CDO's and CDO tranches?
Jon Gregory of BNP Paribas and Jean-Paul Laurent of Univeristy of Lyon and BNP Paribas in their paper, "In the Core of Correlation," indicate the appeal of the Guassian single-factor Copula Model relates to: (i) its ease of implementing via Monte Carlo simulation, (ii) the speed with which prices and deltas can be determined, and (iii) its underlying dependence structure has been linked to equity returns correlation.
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