Related papers: Credit contagion and risk management with multiple…
This paper introduces a novel framework to study default dependence and systemic risk in a financial network that evolves over time. We analyse several indicators of risk, and develop a new latent space model to assess the health of key…
Microfinance, despite its significant potential for poverty reduction, is facing sustainability hardships due to high default rates. Although many methods in regular finance can estimate credit scores and default probabilities, these…
We study an optimal investment problem under default risk where related information such as loss or recovery at default is considered as an exogenous random mark added at default time. Two types of agents who have different levels of…
In this paper, we performs a credit risk analysis, on the data of past loan applicants of a company named Lending Club. The calculation required the use of exploratory data analysis and machine learning classification algorithms, namely,…
We analyze the practical consequences of the bilateral counterparty risk adjustment. We point out that past literature assumes that, at the moment of the first default, a risk-free closeout amount will be used. We argue that the legal…
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…
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…
In this article, we consider a 2 factors-model for pricing defaultable bond with discrete default intensity and barrier where the 2 factors are stochastic risk free short rate process and firm value process. We assume that the default event…
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 recent years, multi-factor strategies have gained increasing popularity in the financial industry, as they allow investors to have a better understanding of the risk drivers underlying their portfolios. Moreover, such strategies promise…
This paper investigates two mechanisms of financial contagion that are, firstly, the correlated exposure of banks to the same source of risk, and secondly the direct exposure of banks in the interbank market. It will consider a random…
Risk management is an important practice in the banking industry. In this paper we develop a new methodology to estimate and predict the probability of default (PD) based on the rating transition matrices, which relates the rating…
We apply multiple testing procedures to the validation of estimated default probabilities in credit rating systems. The goal is to identify rating classes for which the probability of default is estimated inaccurately, while still…
How, and to what extent, does an interconnected financial system endogenously amplify external shocks? This paper attempts to reconcile some apparently different views emerged after the 2008 crisis regarding the nature and the relevance of…
In this paper, we employ Credit Default Swaps (CDS) to model the joint and conditional distress probabilities of banks in Europe and the U.S. using factor copulas. We propose multi-factor, structured factor, and factor-vine models where the…
A direct method for calculating default rates by industry and target corporate segments is not possible given the lack of statistical data. The proposed paper considers a model for filtering the dynamics of the probability of default of…
The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical…
Credit Valuation Adjustment is a balance sheet item which is nowadays subject to active risk management by specialized traders. However, one of the most important risk factors, which is the vector of default intensities of the counterparty,…
Risk-averse investors often wish to exclude stocks from their portfolios that bear high credit risk, which is a measure of a firm's likelihood of bankruptcy. This risk is commonly estimated by constructing signals from quarterly accounting…
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…