Related papers: Fluctuation Analysis for the Loss From Default
In this review, we systematically examine the principles and the practices of fluctuations such as the momentum and the charge fluctuations as applied to the heavy ion collisions. Main emphases are: (i) Fluctuations as signals of phase…
We discuss the parameter estimation of the probability of default (PD), the correlation between the obligors, and a phase transition. In our previous work, we studied the problem using the beta-binomial distribution. A non-equilibrium phase…
In the context of an exactly soluble out of equilibrium (quenched) model, we study an extension of the fluctuation-dissipation relation. This involves a modified differential form of this relation, with an effective temperature which may…
We compare two models of corporate default by calculating the Jeffreys-Kullback-Leibler divergence between their predicted default probabilities when asset correlations are either high or low. Our main results show that the divergence…
This paper presents comparison results and establishes risk bounds for credit portfolios within classes of Bernoulli mixture models, assuming conditionally independent defaults that are stochastically increasing with a common risk factor.…
Small systems in contact with a heat bath evolve by stochastic dynamics. Here we show that, when one such small system is weakly coupled to another one, it is possible to infer the presence of such weak coupling by observing the violation…
We consider fluctuations of the time-averaged current in the one-dimensional weakly-asymmetric exclusion process on a ring. The optimal density profile which sustains a given fluctuation exhibits an instability for low enough currents,…
In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…
The issue of model risk in default modeling has been known since inception of the Academic literature in the field. However, a rigorous treatment requires a description of all the possible models, and a measure of the distance between a…
A new model for stock price fluctuations is proposed, based upon an analogy with the motion of tracers in Gaussian random fields, as used in turbulent dispersion models and in studies of transport in dynamically disordered media. Analytical…
We study a hard sphere gas at equilibrium, and prove that in the low density limit, the fluctuations converge to a Gaussian process governed by the fluctuating Boltzmann equation. This result holds for arbitrarily long times. The method of…
We develop a General Fluctuation Formula for phase variables that are odd under time reversal. Simulations are used to verify the new formula.
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…
The Fluctuation Theorem describes the probability ratio of observing trajectories that satisfy or violate the second law of thermodynamics. It has been proved in a number of different ways for thermostatted deterministic nonequilibrium…
We study a discrete stochastic model of a molecular motor. This discrete model can be viewed as a \emph{minimal} ratchet model. We extend our previous work on this model, by further investigating the constraints imposed by the Fluctuation…
We study fluctuations of the empirical processes of a non-equilibrium interacting particle system consisting of two species over a domain that is recently introduced in [8] and establish its functional central limit theorem. This…
A new procedure is presented for the objective comparison and evaluation of default definitions. This allows the lender to find a default threshold at which the financial loss of a loan portfolio is minimised, in accordance with Basel II.…
This work considers a type of slow-fast system, where the slow component is driven by fractional Brownian motion with H > 1/2 and the fast component is a Markovian stationary process. Our solution mapping is defined based on the…
We consider the effect of recovery rates on a pool of credit assets. We allow the recovery rate to depend on the defaults in a general way. Using the theory of large deviations, we study the structure of losses in a pool consisting of a…
In this Article we review some recent progresses in the field of non-equilibrium linear response theory. We show how a generalization of the fluctuation-dissipation theorem can be derived for Markov processes, and discuss the…