Related papers: Graphical models for correlated defaults
We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest…
In this paper we propose a copula contagion mixture model for correlated default times. The model includes the well known factor, copula, and contagion models as its special cases. The key advantage of such a model is that we can study the…
We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events…
Filiz et al. (2008) proposed a model for the pattern of defaults seen among a group of firms at the end of a given time period. The ingredients in the model are a graph, where the vertices correspond to the firms and the edges describe the…
A standard quantitative method to access credit risk employs a factor model based on joint multivariate normal distribution properties. By extending a one-factor Gaussian copula model to make a more accurate default forecast, this paper…
We show how to analyze and interpret the correlation structures, the conditional expectation values and correlation coefficients of exchangeable Bernoulli random variables. We study implied default distributions for the iTraxx-CJ tranches…
In recent years research on credit risk modelling has mainly focused on default probabilities. Recovery rates are usually modelled independently, quite often they are even assumed constant. Then, however, the structural connection between…
We present a joint copula-based model for insurance claims and sizes. It uses bivariate copulae to accommodate for the dependence between these quantities. We derive the general distribution of the policy loss without the restrictive…
Many types of bounded data defined on the unit interval arise naturally as ratios of the form $X/(X + Y)$. In the existing literature, the main statistical models proposed for this type of bounded data typically based on the assumption that…
This paper presents comparison results and establishes risk bounds for credit portfolios within classes of Bernoulli mixture models, assuming conditionally independent defaults that are stochastically increasing with a common risk factor.…
We exploit Gaussian copulas to specify a class of multivariate circular distributions and obtain parametric models for the analysis of correlated circular data. This approach provides a straightforward extension of traditional multivariate…
Analysing dependent risks is an important task for insurance companies. A dependency is reflected in the fact that information about one random variable provides information about the likely distribution of values of another random…
Link sign prediction on a signed graph is a task to determine whether the relationship represented by an edge is positive or negative. Since the presence of negative edges violates the graph homophily assumption that adjacent nodes are…
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…
The Macaulay2 package GraphicalModels contains algorithms for the algebraic study of graphical models associated to undirected, directed and mixed graphs, and associated collections of conditional independence statements. Among the…
Graphical models are widely used in diverse application domains to model the conditional dependencies amongst a collection of random variables. In this paper, we consider settings where the graph structure is covariate-dependent, and…
A framework for quantifying dependence between random vectors is introduced. With the notion of a collapsing function, random vectors are summarized by single random variables, called collapsed random variables in the framework. Using this…
In actuarial research, a task of particular interest and importance is to predict the loss cost for individual risks so that informative decisions are made in various insurance operations such as underwriting, ratemaking, and capital…
We compare observed corporate cumulative default probabilities to those calculated using a stochastic model based on an extension of the work of Black and Cox and find that corporations default as if via diffusive dynamics. The model, based…
The current research on credit risk is primarily focused on modeling default probabilities. Recovery rates are often treated as an afterthought; they are modeled independently, in many cases they are even assumed constant. This is despite…