We discuss a Levy multivariate model for financial assets which incorporates jumps, skewness, kurtosis and stochastic volatility. We use it to describe the behavior of a series of stocks or indexes, and to study a multi-firm, value-based default model.
Starting from a independent Brownian world, we introduce jumps and other deviations from normality, including non-Gaussian dependence.
We use a stochastic time-change technique and provide the details for a
The main feature of the model is the fact that - opposite to other, non jointly Gaussian settings - its risk neutral dependence can be calibrated from univariate derivative prices, providing a surprisingly good fit.