Modelling joint failure probabilities using bi-variate normal copula
I have been given an exercise to solve, but I really can't get started despite having tried for a while. The subject is pretty new to me, so if someone could help me a bit, I would really be grateful.
I have 2 companies V and W.
The probability of company V defaulting in 1 year is 10%.
The probability of company W defaulting in 1 year is 15%.
We assume that default correlation is 30%.
Calculate the probability that both company default in 1 year by using bi-variate normal copula.
Since we did a simulation exercise in class, I thought that this was the way to go. However, I ended up nowhere because I just end up having a bunch of simulated default times for both companies, and don't know what to do with them.
Is there an analytical way to solve this problem?
Thank you very much,