Related papers: Default Risk Modeling Beyond the First-Passage App…
We consider a market model where there are two levels of information. The public information generated by the financial assets, and a larger flow of information that contains additional knowledge about a random time. This random time can…
In this paper we propose a method to obtain global explanations for trained black-box classifiers by sampling their decision function to learn alternative interpretable models. The envisaged approach provides a unified solution to…
We consider a stochastic logistic growth model involving both birth and death rates in the drift and diffusion coefficients for which extinction eventually occurs almost surely. The associated complete Fokker-Planck equation describing the…
We study general properties such as the solution representation of a moving boundary value problem of the Black-Scholes equation, its min-max estimation, lower and upper gradient estimates, and strict monotonicity with respect to the…
We propose a possible solution to a public challenge posed by the Fair Isaac Corporation (FICO), which is to provide an explainable model for credit risk assessment. Rather than present a black box model and explain it afterwards, we…
We propose a model for the credit markets in which the random default times of bonds are assumed to be given as functions of one or more independent "market factors". Market participants are assumed to have partial information about each of…
In the aftermath of the global financial crisis, much attention has been paid to investigating the appropriateness of the current practice of default risk modeling in banking, finance and insurance industries. A recent empirical study by…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
We explore the diffusion process in the non-Markovian spatio-temporal noise.%the escape rate problem in the non-Markovian spatio-temporal random noise. There is a non-trivial short memory regime, i.e., the Markovian limit characterized by a…
Inspired by recently developed Fokker--Planck models for Bose--Einstein statistics, we study a consensus formation model with condensation effects driven by a polynomial diffusion coefficient vanishing at the domain boundaries. For 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…
Credit risk in the China's bond market has become increasingly evident, creating a progressively escalating risk of default for credit bond investors. Given the current incomplete and inaccurate bond information disclosure, timely tracking…
The two main approaches in credit risk are the structural approach pioneered in Merton (1974) and the reduced-form framework proposed in Jarrow & Turnbull (1995) and in Artzner & Delbaen (1995). The goal of this article is to provide a…
In this paper is investigated the pricing problem of options on bonds with credit risk based on analysis on two kinds of solving problems for the Black-Scholes equations. First, a solution representation of the Black-Scholes equation with…
In this paper we investigate a utility maximization problem with drift uncertainty in a multivariate continuous-time Black-Scholes type financial market which may be incomplete. We impose a constraint on the admissible strategies that…
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…
This paper builds a finite-horizon model to study the role of physical collateral in a model of strategic defaults, when the borrower can develop reputation for honesty. Asset ownership increases attractiveness of the reputational channel:…
Covered bonds are a specific example of senior secured debt. If the issuer of the bonds defaults the proceeds of the assets in the cover pool are used for their debt service. If in this situation the cover pool proceeds do not suffice for…
This paper studies how international investors' concerns about model misspecification affect sovereign bond spreads. We develop a general equilibrium model of sovereign debt with endogenous default wherein investors fear that the…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…