Related papers: The economic default time and the Arcsine law

In a dynamic economy, we characterize the fiscal policy of the government when it levies distortionary taxes and issues defaultable bonds to finance its stochastic expenditure. Default may occur in equilibrium as it prevents the government…

We present the qGaussian generalization of the Merton framework, which takes into account slow fluctuations of the volatility of the firms market value of financial assets. The minimal version of the model depends on the Tsallis entropic…

This paper extends the classical dividend problem by incorporating a novel, path-dependent mechanism of firm default. In the traditional framework, ruin occurs when the surplus process first reaches zero. In contrast, default in our model…

We develop a dynamic point process model of correlated default timing in a portfolio of firms, and analyze typical default profiles in the limit as the size of the pool grows. In our model, a firm defaults at a stochastic intensity that is…

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…

We consider financial networks, where banks are connected by contracts such as debts or credit default swaps. We study the clearing problem in these systems: we want to know which banks end up in a default, and what portion of their…

This work focuses on financial risks from a probabilistic point of view. The value of a firm is described as a geometric Brownian motion and default emerges as a first passage time event. On the technical side, the critical threshold that…

In this paper, we deal with an axiomatic approach to default risk. We introduce the notion of a default risk measure, which generalizes the classical probability of default (PD), and allows to incorporate model risk in various forms. We…

We present a general framework for the estimation of corporate default based on a firm's capital structure, when its assets are assumed to follow a pure jump L\'evy processes; this setup provides a natural extension to usual default metrics…

In dynamic capital structure models with an investor break-even condition, the firm's Bellman equation may not generate a contraction mapping, so the standard existence and uniqueness conditions do not apply. First, we provide an example…

The classical reduced-form and filtration expansion framework in credit risk is extended to the case of multiple, non-ordered defaults, assuming that conditional densities of the default times exist. Intensities and pricing formulas are…

We propose a unified framework for equity and credit risk modeling, where the default time is a doubly stochastic random time with intensity driven by an underlying affine factor process. This approach allows for flexible interactions…

We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…

This article aims to explore an empirical approach to analyze the macroeconomicsdeterminants of default of borrowers. For this purpose, we have measured the impact of the adverse economic conditions on the degradation of the credit…

We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume…

We develop a generalization of the Black-Cox structural model of default risk. The extended model captures uncertainty related to firm's ability to avoid default even if company's liabilities momentarily exceeding its assets. Diffusion in a…

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…

Diffusion in a linear potential in the presence of position-dependent killing is used to mimic a default process. Different assumptions regarding transport coefficients, initial conditions, and elasticity of the killing measure lead to…

In this paper, we propose a method that provides a useful technique to compare relationship between risks involved that takes customer become defaulter and debt collection process that might make this defaulter recovered. Through estimation…

Corporate defaults may be triggered by some major market news or events such as financial crises or collapses of major banks or financial institutions. With a view to develop a more realistic model for credit risk analysis, we introduce a…