Related papers: A tractable LIBOR model with default risk
The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustments (CVA's) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation…
The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and…
With negative growth in real production in many countries and debt levels which become an increasing burden on developed societies, the calls for a change in economic policy and even the monetary system become louder and increasingly…
Survival analysis has become a standard approach for modelling time to default by time-varying covariates in credit risk. Unlike most existing methods that implicitly assume a stationary data-generating process, in practise, mortgage…
Conic martingales refer to Brownian martingales evolving between bounds. Among other potential applications, they have been suggested for the sake of modeling conditional survival probabilities under partial information, as usual in…
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…
We develop a modelling framework for multiple yield curves driven by continuous-state branching processes with immigration (CBI processes). Exploiting the self-exciting behavior of CBI jump processes, this approach can reproduce the…
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 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…
This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset…
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…
In this paper, we have studied the pricing of a continuously collateralized CDS. We have made use of the "survival measure" to derive the pricing formula in a straightforward way. As a result, we have found that there exists irremovable…
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
The current research on credit risk is primarily focused on modeling default probabilities. Recovery rates are often treated as an afterthought; they are modeled independently, in many cases they are even assumed constant. This is despite…
SOFR derivatives market remains illiquid and incomplete so it is not amenable to classical risk-neutral term structure models which are based on the assumption of perfect liquidity and completeness. This paper develops a statistical SOFR…
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…
We derive explicit valuation formulae for an exotic path-dependent interest rate derivative, namely an option on the composition of LIBOR rates. The formulae are based on Fourier transform methods for option pricing. We consider two models…
This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…
With the reform of interest rate benchmarks, interbank offered rates (IBORs) like LIBOR have been replaced by risk-free rates (RFRs), such as the Secured Overnight Financing Rate (SOFR) in the U.S. and the Euro Short-Term Rate (\euro STR)…
This paper provides a discrete time LIBOR analog, which can be used for arbitrage-free discretization of Levy LIBOR models or discrete approximation of continuous time LIBOR market models. Using the work of Eberlein and Oezkan as an…