Related papers: Sovereign Default Risk and Uncertainty Premia
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…
There are many studies on development of models for analyzing some derivatives such as credit default swaps .
This study investigates the functioning of modern payment systems through the lens of banks' maturity mismatch practices, and it examines the effects of banks' refusal to roll over short-term interbank liabilities on financial stability.…
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…
There is empirical evidence that recovery rates tend to go down just when the number of defaults goes up in economic downturns. This has to be taken into account in estimation of the capital against credit risk required by Basel II to cover…
The European sovereign debt crisis has impaired many European banks. The distress on the European banks may transmit worldwide, and result in a large-scale knock-on default of financial institutions. This study presents a computer…
We propose a new inferential methodology for dynamic economies that is robust to misspecification of the mechanism generating frictions. Economies with frictions are treated as perturbations of a frictionless economy that are consistent…
Recently, incomplete-market techniques have been used to develop a model applicable to credit default swaps (CDSs) with results obtained that are quite different from those obtained using the market-standard model. This article makes use of…
We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity…
This paper studies the robust reinsurance and investment games for competitive insurers. Model uncertainty is characterized by a class of equivalent probability measures. Each insurer is concerned with relative performance under the…
In this article, we study the problem of pricing defaultable bond with discrete default intensity and barrier under constant risk free short rate using higher order binary options and their integrals. In our credit risk model, the risk free…
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…
We consider an equity market subject to risk from both unhedgeable shocks and default. The novelty of our work is that to partially offset default risk, investors may dynamically trade in a credit default swap (CDS) market. Assuming…
We study an optimal investment problem under default risk where related information such as loss or recovery at default is considered as an exogenous random mark added at default time. Two types of agents who have different levels of…
We present a model that investigates the spontaneous emergence of randomness in equity market microstructure. The phase space analysis of our model exposes an endogenous source of fluctuation in price and volume. We formulate a control…
This paper studies an optimal reinsurance problem for a utility-maximizing insurer, subject to the reinsurer's endogenous default and background risk. An endogenous default occurs when the insurer's contractual indemnity exceeds the…
Networked-guarantee loans may cause the systemic risk related concern of the government and banks in China. The prediction of default of enterprise loans is a typical extremely imbalanced prediction problem, and the networked-guarantee make…
Borrowing constraints are a key component of modern international macroeconomic models. The analysis of Emerging Markets (EM) economies generally assumes collateral borrowing constraints, i.e., firms access to debt is constrained by the…
Differentially private models seek to protect the privacy of data the model is trained on, making it an important component of model security and privacy. At the same time, data scientists and machine learning engineers seek to use…
Estimating uncertainty of machine learning models is essential to assess the quality of the predictions that these models provide. However, there are several factors that influence the quality of uncertainty estimates, one of which is the…