Related papers: Default risk modeling beyond the first-passage app…
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…
Regression models for limited continuous dependent variables having a non-negligible probability of attaining exactly their limits are presented. The models differ in the number of parameters and in their flexibility. Fractional data being…
The 2008 financial crisis illustrated the need for a thorough, functional understanding of systemic risk in strongly interconnected financial structures. Dynamic processes on complex networks being intrinsically difficult, most recent…
When the unconditioned process is a diffusion submitted to a space-dependent killing rate $k(\vec x)$, various conditioning constraints can be imposed for a finite time horizon $T$. We first analyze the conditioned process when one imposes…
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…
This paper studies how violations of structural assumptions like expected utility and exponential discounting can be connected to basic rationality violations, even though these assumptions are typically regarded as independent building…
Based on supermodularity ordering properties, we show that convex risk measures of credit losses are nondecreasing w.r.t. credit-credit and, in a wrong-way risk setup, credit-market, covariances of elliptically distributed latent factors.…
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…
A three-dimensional extension of the structural default model with firms' values driven by correlated diffusion processes is presented. Green's function based semi-analytical methods for solving the forward calibration problem and backward…
We introduce the general arbitrage-free valuation framework for counterparty risk adjustments in presence of bilateral default risk, including default of the investor. We illustrate the symmetry in the valuation and show that the adjustment…
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…
In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market…
Many researchers have applied classical statistical decision theory to evaluate treatment choices and learn optimal policies. However, because this framework is based solely on realized outcomes under chosen decisions and ignores…
Data on hundreds of variables related to individual consumer finance behavior (such as credit card and loan activity) is routinely collected in many countries and plays an important role in lending decisions. We postulate that the detailed…
This paper proposes a simple technical approach for the analytical derivation of Point-in-Time PD (probability of default) forecasts, with minimal data requirements. The inputs required are the current and future Through-the-Cycle PDs of…
The multiple extension problem arises frequently in diagnostic and default inference. That is, we can often use any of a number of sets of defaults or possible hypotheses to explain observations or make Predictions. In default inference,…
We model the term structure of the forward default intensity and the default density by using L\'evy random fields, which allow us to consider the credit derivatives with an after-default recovery payment. As applications, we study the…
Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…
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,…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…