Related papers: qGaussian model of default
The present paper introduces a structural framework to model dependent defaults, with a particular interest in their contagion.
This paper proposes a formal framework for reverse stress testing geopolitical risk in corporate credit portfolios. A joint macro-financial scenario vector, augmented with an explicit geopolitical risk factor, is mapped into stressed…
Credit capital requirements in Internal Rating Based approaches require the calibration of two key parameters: the probability of default and the loss-given-default. This letter considers the uncertainty about these two parameters and…
We study a well-known estimator of the fractal index of a stochastic process. Our framework is very general and encompasses many models of interest; we show how to extend the theory of the estimator to a large class of non-Gaussian…
First passage models, where corporate assets undergo correlated random walks and a company defaults if its assets fall below a threshold provide an attractive framework for modeling the default process. Typical one year default correlations…
Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…
We propose a stochastic process for stock movements that, with just one source of Brownian noise, has an instantaneous volatility that rises from a type of statistical feedback across many time scales. This results in a stationary…
The prediction of crack initiation and propagation in ductile failure processes are challenging tasks for the design and fabrication of metallic materials and structures on a large scale. Numerical aspects of ductile failure dictate a…
This paper presents a new method to assess default risk based on applying the CEV process to the KMV model. We find that the volatility of the firm asset value may not be a constant, so we assume the firm's asset value dynamics are given by…
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.…
Corporate failure resonates widely leaving practitioners searching for understanding of default risk. Managers seek to steer away from trouble, credit providers to avoid risky loans and investors to mitigate losses. Applying Topological…
The fragility of financial systems was starkly demonstrated in early 2023 through a cascade of major bank failures in the United States, including the second, third, and fourth largest collapses in the US history. The highly interdependent…
We revisit Merton's continuous-time portfolio selection through a data-driven, distributionally robust lens. Our aim is to tap the benefits of frequent trading over short horizons while acknowledging that drift is hard to pin down, whereas…
Models for bankruptcy prediction are useful in several real-world scenarios, and multiple research contributions have been devoted to the task, based on structured (numerical) as well as unstructured (textual) data. However, the lack of a…
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…
Credit risk management in Italy is characterized, in the period June 2008 to June 2012, by frequent (frequency=0.5 cycles per year) and intense (peak amplitude: mean=39.2 billion Euros, s.e.=2.83 billion Euros) quarterly contractions and…
This paper provides sufficient conditions for the time of bankruptcy (of a company or a state) for being a totally inaccessible stopping time and provides the explicit computation of its compensator in a framework where the flow of market…
In this study we suggest a portfolio selection framework based on option-implied information and multivariate non-Gaussian models. The proposed models incorporate skewness, kurtosis and more complex dependence structures among stocks…
The aim of this paper is first the detection of multiple abrupt changes of the long-range dependence (respectively self-similarity, local fractality) parameters from a sample of a Gaussian stationary times series (respectively time series,…
We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two…