Related papers: qGaussian model of default
In structural credit risk models, default events and the ensuing losses are both derived from the asset values at maturity. Hence it is of utmost importance to choose a distribution for these asset values which is in accordance with…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
One approach to the analysis of stochastic fluctuations in market prices is to model characteristics of investor behaviour and the complex interactions between market participants, with the aim of extracting consequences in the aggregate.…
The main purpose of this paper is to extend the information-based asset-pricing framework of Brody-Hughston-Macrina to a more general set-up. We include a wider class of models for market information and in contrast to the original paper,…
The accurate prediction of time-changing variances is an important task in the modeling of financial data. Standard econometric models are often limited as they assume rigid functional relationships for the variances. Moreover, function…
Risk-averse investors often wish to exclude stocks from their portfolios that bear high credit risk, which is a measure of a firm's likelihood of bankruptcy. This risk is commonly estimated by constructing signals from quarterly accounting…
We investigate under which conditions a single simulation of joint default times at a final time horizon can be decomposed into a set of simulations of joint defaults on subsequent adjacent sub-periods leading to that final horizon. Besides…
A simple graphical model for correlated defaults is proposed, with explicit formulas for the loss distribution. Algebraic geometry techniques are employed to show that this model is well posed for default dependence: it represents any given…
This work focuses on financial risks from a probabilistic point of view. The value of a firm is described as a geometric Brownian motion and default emerges as a first passage time event. On the technical side, the critical threshold that…
The problem of non-stationarity in financial markets is discussed and related to the dynamic nature of price volatility. A new measure is proposed for estimation of the current asset volatility. A simple and illustrative explanation is…
We introduce a novel machine learning model for credit risk by combining tree-boosting with a latent spatio-temporal Gaussian process model accounting for frailty correlation. This allows for modeling non-linearities and interactions among…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
In this paper we present a Bayesian competing risk proportional hazards model to describe mortgage defaults and prepayments. We develop Bayesian inference for the model using Markov chain Monte Carlo methods. Implementation of the model is…
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 revisit the classical Merton consumption--investment problem when risky-asset returns are modeled by stochastic differential equations interpreted through a general $\alpha$-integral, interpolating between It\^{o}, Stratonovich, and…
This paper studies the consequences of capturing non-linear dependence among the covariates that drive the default of different obligors and the overall riskiness of their credit portfolio. Joint default modeling is, without loss of…
We present a model of roundoff error analysis that combines simplicity with predictive power. Though not considering all sources of roundoff within an algorithm, the model is related to a recursive roundoff error analysis and therefore…
In this paper, a geometric function is introduced to reflect the attenuation speed of impact of one firm's default to its partner. If two firms are competitions (copartners), the default intensity of one firm will decrease (increase)…
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…
We consider a general tractable model for default contagion and systemic risk in a heterogeneous financial network, subject to an exogenous macroeconomic shock. We show that, under some regularity assumptions, the default cascade model…