Related papers: A Guide to Modeling Credit Term Structures
This paper considers mutual obligations in the interconnected bank system and analyzes their influence on joint and marginal survival probabilities as well as CDS and FTD prices for the individual banks. To make the role of mutual…
In this paper, we extend the vertical modeling approach for the analysis of survival data with competing risks to incorporate a cured fraction in the population, that is, a proportion of the population for which none of the competing events…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
Important models in insurance, for example the Carm{\'e}r--Lundberg theory and the Sparre Andersen model, essentially rely on the Poisson process. The process is used to model arrival times of insurance claims. This paper extends the…
We consider the effect of recovery rates on a pool of credit assets. We allow the recovery rate to depend on the defaults in a general way. Using the theory of large deviations, we study the structure of losses in a pool consisting of a…
The major perspective of this paper is to provide more evidence into the empirical determinants of capital structure adjustment in different macroeconomics states by focusing and discussing the relative importance of firm-specific and…
In this work we develop a tractable structural model with analytical default probabilities depending on a random default barrier and possibly random volatility ideally associated with a scenario based underlying firm debt. We show how to…
This paper studies the stochastic modeling of market drawdown events and the fair valuation of insurance contracts based on drawdowns. We model the asset drawdown process as the current relative distance from the historical maximum of the…
We extend the now classic structural credit modeling approach of Black and Cox to a class of "two-factor" models that unify equity securities such as options written on the stock price, and credit products like bonds and credit default…
In this work we study the price-hedge issue for general defaultable contracts characterized by the presence of a contingent CSA of switching type. This is a contingent risk mitigation mechanism that allow the counterparties of a defaultable…
Credit risk default prediction remains a cornerstone of risk management in the financial industry. The task involves estimating the likelihood that a borrower will fail to meet debt obligations, an objective critical for lending decisions,…
In this work we present a simple estimation procedure for a general frailty model for analysis of prospective correlated failure times. Earlier work showed this method to perform well in a simulation study. Here we provide rigorous…
This paper addresses the ``curse of dimensionality'' in the loss valuation of credit risk models. A dimension reduction methodology based on the Bayesian filter and smoother is proposed. This methodology is designed to achieve a fast and…
Conditional Gaussian graphical models (cGGM) are a recent reparametrization of the multivariate linear regression model which explicitly exhibits $i)$ the partial covariances between the predictors and the responses, and $ii)$ the partial…
Financial undertakings often have to deal with liabilities of the form 'non-hedgeable claim size times value of a tradeable asset', e.g. foreign property insurance claims times fx rates. Which strategy to invest in the tradeable asset is…
Semi-parametric survival analysis methods like the Cox Proportional Hazards (CPH) regression (Cox, 1972) are a popular approach for survival analysis. These methods involve fitting of the log-proportional hazard as a function of the…
We present compelling empirical evidence for a new interpretation of the Forward Rate Curve (FRC) term structure. We find that the average FRC follows a square-root law, with a prefactor related to the spot volatility, suggesting a…
This paper introduces a new causal structure learning method for nonstationary time series data, a common data type found in fields such as finance, economics, healthcare, and environmental science. Our work builds upon the constraint-based…
We consider a continuous-time financial market with no arbitrage and no transactions costs. In this setting, we introduce two types of perpetual contracts, one in which the payoff to the long side is a fixed function of the underlyers and…
We follow a long path for Credit Derivatives and Collateralized Debt Obligations (CDOs) in particular, from the introduction of the Gaussian copula model and the related implied correlations to the introduction of arbitrage-free dynamic…