Related papers: The economic default time and the Arcsine law
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
Pricing formulae for defaultable corporate bonds with discrete coupons under consideration of the government taxes in the united model of structural and reduced form models are provided. The aim of this paper is to generalize the…
Credit risk assessment is a crucial aspect of financial decision-making, enabling institutions to predict the likelihood of default and make informed lending decisions. Two prominent methodologies in credit risk modeling are logistic…
This article extends the autoregressive count time series model class by allowing for a model with regimes, that is, some of the parameters in the model depend on the state of an unobserved Markov chain. We develop a quasi-maximum…
We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…
We consider structural credit modeling in the important special case where the log-leverage ratio of the firm is a time-changed Brownian motion (TCBM) with the time-change taken to be an independent increasing process. Following the…
This paper develops a two-dimensional structural framework for valuing credit default swaps and corporate bonds in the presence of default contagion. Modelling the values of related firms as correlated geometric Brownian motions with…
In this short paper, we study the simulation of a large system of stochastic processes subject to a common driving noise and fast mean-reverting stochastic volatilities. This model may be used to describe the firm values of a large pool of…
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…
In this article we provide a valuation formula for a defaultable perpetual Russian option in the Black-Scholes market where the default time is modelled as the last passage time of the running maximum of the stock price. In this setting,…
According to theoretical models of valuing risky corporate securities, risk of default is primary component in overall yield spread. However, sizable empirical literature considers it otherwise by giving more importance to non-default risk…
In this paper we develop a tractable structural model with analytical default probabilities depending on some dynamics parameters, and we show how to calibrate the model using a chosen number of Credit Default Swap (CDS) market quotes. 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…
We present a simple model of firm rating evolution. We consider two sources of defaults: individual dynamics of economic development and Potts-like interactions between firms. We show that such a defined model leads to phase transition,…
The main purpose of this paper is to extend the information-based asset-pricing framework of Brody-Hughston-Macrina to a more general set-up. We include a wider class of models for market information and in contrast to the original paper,…
First passage models, where corporate assets undergo a random walk and default occurs if the assets fall below a threshold, provide an attractive framework for modeling the default process. Recently such models have been generalized to…
A multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration…
This paper presents a meta-learning framework for credit risk assessment of Italian Small and Medium Enterprises (SMEs) that explicitly addresses the temporal misalignment of credit scoring models. The approach aligns financial statement…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
The issue of model risk in default modeling has been known since inception of the Academic literature in the field. However, a rigorous treatment requires a description of all the possible models, and a measure of the distance between a…