Related papers: Dynamics of multivariate default system in random …
We investigate the impact of available information on the estimation of the default probability within a generalized structural model for credit risk. The traditional structural model where default is triggered when the value of the firm's…
In classical contagion models, default systems are Markovian conditionally on the observation of their stochastic environment, with interacting intensities. This necessitates that the environment evolves autonomously and is not influenced…
Banks and financial institutions all over the world manage portfolios containing tens of thousands of customers. Not all customers are high credit-worthy, and many possess varying degrees of risk to the Bank or financial institutions that…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
There has been a long-standing and at times fractious debate whether complex and large systems can be stable. In ecology, the so-called `diversity-stability debate' arose because mathematical analyses of ecosystem stability were either…
The classical reduced-form and filtration expansion framework in credit risk is extended to the case of multiple, non-ordered defaults, assuming that conditional densities of the default times exist. Intensities and pricing formulas are…
The concept of random dynamical system is a comparatively recent development combining ideas and methods from the well developed areas of probability theory and dynamical systems. Due to our inaccurate knowledge of the particular physical…
Diffusion in a linear potential in the presence of position-dependent killing is used to mimic a default process. Different assumptions regarding transport coefficients, initial conditions, and elasticity of the killing measure lead to…
A system is considered, which is subject to external and possibly fatal shocks, with dependence between the fatality of a shock and the system age. Apart from these shocks, the system suffers from competing soft and sudden failures, where…
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…
We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events…
Prediction of events is the challenge in many different disciplines, from meteorology to finance; the more this task is difficult, the more a system is {\it complex}. Nevertheless, even according to this restricted definition, a general…
Models for analyzing multivariate data sets with missing values require strong, often unassessable, assumptions. The most common of these is that the mechanism that created the missing data is ignorable - a twofold assumption dependent on…
We present a general model for default time, making precise the role of the intensity process, and showing that this process allows for a knowledge of the conditional distribution of the default only "before the default". This lack of…
Since the Great Financial Crisis (GFC), the use of stress tests as a tool for assessing the resilience of financial institutions to adverse financial and economic developments has increased significantly. One key part in such exercises is…
This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…
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 study the mean field approximation of a recent model of cascades on networks relevant to the investigation of systemic risk control in financial networks. In the model, the hypothesis of a trend reinforcement in the stochastic process…
The impact of a stress scenario of default events on the loss distribution of a credit portfolio can be assessed by determining the loss distribution conditional on these events. While it is conceptually easy to estimate loss distributions…
Populations of replicating entities frequently experience sudden or cyclical changes in environment. We explore the implications of this phenomenon via a environmental switching parameter in several common evolutionary dynamics models…