Survival rates

[DanM]

So I'm writing code (in C++) for calculating the joint probability of default between two entities using the Gaussian Copula method (not for school or work - just to improve my C++ skills and to gain a better understanding of default risk, etc).

I've been successful in implementing the copula, but I have a question regarding the inputs for the marginal probabilities. Is it correct to compute the survival rates (from 0 to t) as follows,

(S(t)=e^{-\int_{0}^{t}\lambda (t)dt}\)

for both entities, where (\lambda \) is the default intensity, and then use that as the marginal probabilities for the Gaussian Copula?

 

[John]

sure, you can use the discrete form of
S(t) = exp(- SigmaSum( lambda(t).dt)), and specify the lambda(t) for each discrete time period.

 

[DanM]

Thanks!