Related papers: US Corporate Bond Yield Spread : A default risk de…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…
Default risk calculus plays a crucial role in portfolio optimization when the risky asset is under threat of bankruptcy. However, traditional stochastic control techniques are not applicable in this scenario, and additional assumptions are…
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…
It had been believed in the conventional practice that the risk of a bank going bankrupt is lessened in a straightforward manner by transferring the risk of loan defaults. But the failure of American International Group in 2008 posed a more…
Credit risk assessment of a company is commonly conducted by utilizing financial ratios that are derived from its financial statements. However, this approach may not fully encompass other significant aspects of a company. We propose the…
PD curve calibration refers to the transformation of a set of rating grade level probabilities of default (PDs) to another average PD level that is determined by a change of the underlying portfolio-wide PD. This paper presents a framework…
We study multiple defaults where the global market information is modelled as progressive enlargement of filtrations. We shall provide a general pricing formula by establishing a relationship between the enlarged filtration and the…
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…
Supply chain disruptions constitute an often underestimated risk for financial stability. As in financial networks, systemic risks in production networks arises when the local failure of one firm impacts the production of others and might…
We analyze the size dependence and temporal stability of firm bankruptcy risk in the US economy by applying Zipf scaling techniques. We focus on a single risk factor-the debt-to-asset ratio R-in order to study the stability of the Zipf…
We introduce the concept of no-arbitrage in a credit risk market under ambiguity considering an intensity-based framework. We assume the default intensity is not exactly known but lies between an upper and lower bound. By means of the…
In computational materials science, predicting the yield strain of crosslinked polymers remains a challenging task. A common approach is to identify yield as the first critical point of stress-strain curves simulated by molecular dynamics…
We consider a multivariate default system where random environmental information is available. We study the dynamics of the system in a general setting and adopt the point of view of change of probability measures. We also make a link with…
Inertia and context-dependent choice effects are well-studied classes of behavioural phenomena. While much is known about these effects in isolation, little is known about whether one of them "dominates" the other when both can potentially…
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…
The instability of historical risk factor correlations renders their use in estimating portfolio risk extremely questionable. In periods of market stress correlations of risk factors have a tendency to quickly go well beyond estimated…
This paper develops a structural credit risk model to characterize the difference between the economic and recorded default times for a firm. Recorded default occurs when default is recorded in the legal system. The economic default time is…
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…
In recent years, China's bond market has seen a surge in defaults amid regulatory reforms and macroeconomic volatility. Traditional machine learning models struggle to capture financial data's irregularity and temporal dependencies, while…
In the peer to peer (P2P) lending platform, investors hope to maximize their return while minimizing the risk through a comprehensive understanding of the P2P market. A low and stable average default rate across all the borrowers denotes a…