Related papers: Large Portfolio Asymptotics for Loss From Default
We consider an SPDE description of a large portfolio limit model where the underlying asset prices evolve according to certain stochastic volatility models with default upon hitting a lower barrier. The asset prices and their volatilities…
We analyze the fluctuation of the loss from default around its large portfolio limit in a class of reduced-form models of correlated firm-by-firm default timing. We prove a weak convergence result for the fluctuation process and use it for…
As it is known in the finance risk and macroeconomics literature, risk-sharing in large portfolios may increase the probability of creation of default clusters and of systemic risk. We review recent developments on mathematical and…
We propose a dynamic mean field model for `systemic risk' in large financial systems, which we derive from a system of interacting diffusions on the positive half-line with an absorbing boundary at the origin. These diffusions represent the…
The event of large losses plays an important role in credit risk. As these large losses are typically rare, and portfolios usually consist of a large number of positions, large deviation theory is the natural tool to analyze the tail…
We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the…
The aggregation of individual risks in large credit and insurance portfolios is guided by diversification and the law of large numbers, which formalizes the convergence of sample averages to their means. At the same time, regulatory capital…
We consider a structural stochastic volatility model for the loss from a large portfolio of credit risky assets. Both the asset value and the volatility processes are correlated through systemic Brownian motions, with default determined by…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
Using particle system methodologies we study the propagation of financial distress in a network of firms facing credit risk. We investigate the phenomenon of a credit crisis and quantify the losses that a bank may suffer in a large credit…
In this paper, we study large losses arising from defaults of a credit portfolio. We assume that the portfolio dependence structure is modelled by the Archimedean copula family as opposed to the widely used Gaussian copula. The resulting…
The impact of a stress scenario of default events on the loss distribution of a credit portfolio can be assessed by determining the loss distribution conditional on these events. While it is conceptually easy to estimate loss distributions…
We consider a large market model of defaultable assets in which the asset price processes are modelled as Heston-type stochastic volatility models with default upon hitting a lower boundary. We assume that both the asset prices and their…
We study an open problem of risk-sensitive portfolio allocation in a regime-switching credit market with default contagion. The state space of the Markovian regime-switching process is assumed to be a countably infinite set. To characterize…
We study the impact of contagion in a network of firms facing credit risk. We describe an intensity based model where the homogeneity assumption is broken by introducing a random environment that makes it possible to take into account the…
We consider a large, homogeneous portfolio of life or disability annuity policies. The policies are assumed to be independent conditional on an external stochastic process representing the economic-demographic environment. Using a…
We investigate the density large deviation function for a multidimensional conservation law in the vanishing viscosity limit, when the probability concentrates on weak solutions of a hyperbolic conservation law conservation law. When the…
We investigate the large deviation principle (LDP) of the stationary solutions of stochastic functional differential equations (SFDEs) with infinite delay under small random perturbation. First, we demonstrate the existence and uniqueness…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
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…