Default Probability Estimation via Pair Copula Constructions
Risk Management
2015-08-24 v3
Abstract
In this paper we present a novel approach for firm default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula constructions. For each considered firm, balance sheet data are used to assess the asset value, and to compute its default probability. The asset pricing function is expressed via a pair copula construction, and it is approximated via Monte Carlo simulations. The methodology is illustrated through an application to the analysis of both operative and defaulted firms.
Cite
@article{arxiv.1405.1309,
title = {Default Probability Estimation via Pair Copula Constructions},
author = {Luciana Dalla Valle and Maria Elena De Giuli and Claudia Tarantola and Claudio Manelli},
journal= {arXiv preprint arXiv:1405.1309},
year = {2015}
}
Comments
40 pages, 11 figures