Related papers: Default Probability Estimation via Pair Copula Con…
We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest…
A standard quantitative method to access credit risk employs a factor model based on joint multivariate normal distribution properties. By extending a one-factor Gaussian copula model to make a more accurate default forecast, this paper…
We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model…
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…
We propose a dependence-aware predictive modeling framework for multivariate risks stemmed from an insurance contract with bundling features - an important type of policy increasingly offered by major insurance companies. The bundling…
This paper presents a convenient framework for modeling default process and pricing derivative securities involving credit risk. The framework provides an integrated view of credit valuation adjustment by linking distance-to-default,…
This paper considers the problem of measuring the credit risk in portfolios of loans, bonds, and other instruments subject to possible default under multi-factor models. Due to the amount of the portfolio, the heterogeneous effect of…
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. Using a multivariate normal Copula function for the joint default…
The standard intensity-based approach for modeling defaults is generalized by making the deterministic term structure of the survival probability stochastic via a common jump process. The survival copula of the vector of default times is…
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.…
In this paper we propose a copula contagion mixture model for correlated default times. The model includes the well known factor, copula, and contagion models as its special cases. The key advantage of such a model is that we can study the…
We compare observed corporate cumulative default probabilities to those calculated using a stochastic model based on an extension of the work of Black and Cox and find that corporations default as if via diffusive dynamics. The model, based…
Evaluation of default correlation is an important task in credit risk analysis. In many practical situations, it concerns the joint defaults of several correlated firms, the task that is reducible to a first passage time (FPT) problem. This…
Heterogeneity of economic agents is emphasized in a new trend of macroeconomics. Accordingly the new emerging discipline requires one to replace the production function, one of key ideas in the conventional economics, by an alternative…
This study outlines a comprehensive methodology utilizing copulas to discern inconsistencies in the behavior exhibited by pairs of financial assets. It introduces a robust approach to establishing the interrelationship between the returns…
This work has the objective of estimating default probabilities and correlations of credit portfolios given default rate information through a Bayesian framework using Stan. We use Vasicek's single factor credit model to establish the…
In this paper, we analyze the relative errors in various reliability measures due to the tacit assumption that the components associated with a $n$-component series system or a parallel system are independently working where the components…
In this paper we use a hybrid Monte Carlo-Optimal quantization method to approximate the conditional survival probabilities of a firm, given a structural model for its credit defaul, under partial information. We consider the case when the…
We present a general framework for the estimation of corporate default based on a firm's capital structure, when its assets are assumed to follow a pure jump L\'evy processes; this setup provides a natural extension to usual default metrics…
A bivariate integer-valued autoregressive process of order 1 (BINAR(1)) with copula-joint innovations is studied. Different parameter estimation methods are analyzed and compared via Monte Carlo simulations with emphasis on estimation of…