Related papers: Credit Risk, Market Sentiment and Randomly-Timed D…
We consider an individual or household endowed with an initial capital and an income, modeled as a deterministic process with a continuous drift rate. At first, we model the discounting rate as the price of a zero-coupon bond at zero under…
Consumer protection rules require companies that deploy models to automate decisions in high-stakes settings to explain predictions to decision subjects. These rules are motivated, in part, by the belief that explanations can promote…
We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…
Contextual dynamic pricing aims to set personalized prices based on sequential interactions with customers. At each time period, a customer who is interested in purchasing a product comes to the platform. The customer's valuation for the…
We study how the climate transition through a low-carbon economy, implemented by carbon pricing, propagates in a credit portfolio and precisely describe how carbon price dynamics affects credit risk measures such as probability of default,…
We prove that the default times (or any of their minima) in the dynamic Gaussian copula model of Cr{\'e}pey, Jeanblanc, and Wu (2013) are invariance times in the sense of Cr{\'e}pey and Song (2017), with related invariance probability…
We introduce a class of short-rate models that exhibit a ``higher for longer'' phenomenon. Specifically, the short-rate is modeled as a general time-homogeneous one-factor Markov diffusion on a finite interval. The lower endpoint is assumed…
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…
For a linear combination of random variables, fix some confidence level and consider the quantile of the combination at this level. We are interested in the partial derivatives of the quantile with respect to the weights of the random…
Inflation exhibits state-dependent, skewed, and fat-tailed dynamics that make risk a central concern for monetary policy. Accordingly, inflation risks are distributional and cannot be fully captured by mean-based models. We propose a…
We introduce a random forest approach to enable spreads' prediction in the primary catastrophe bond market. We investigate whether all information provided to investors in the offering circular prior to a new issuance is equally important…
This paper considers the problem of measuring the credit risk in portfolios of loans, bonds, and other instruments subject to possible default under multi-factor models. Due to the amount of the portfolio, the heterogeneous effect of…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
Positive feedback trading, which buys when prices rise and sells when prices fall, has long been criticized for being destabilizing as it moves prices away from the fundamentals. Motivated by the relationship between positive feedback…
In the spirit of behavioral finance, we study the process of opinion formation among investors using a variant of the 2D Voter Model with a tunable social temperature. Further, a feedback acting on the temperature is introduced, such that…
Interbank contagion can theoretically exacerbate losses in a financial system and lead to additional cascade defaults during downturn. In this paper we produce default analysis using both regression and neural network models to verify…
Bond rating Transition Probability Matrices (TPMs) are built over a one-year time-frame and for many practical purposes, like the assessment of risk in portfolios or the computation of banking Capital Requirements (e.g. the new IFRS 9…
We give a comprehensive review of credit term structure modeling methodologies. The conventional approach to modeling credit term structure is summarized and shown to be equivalent to a particular type of the reduced form credit risk model,…
This paper introduces a credit risk rating model for credit risk assessment in quantitative finance, aiming to categorize borrowers based on their behavioral data. The model is trained on data from Experian, a widely recognized credit…