Related papers: General dynamic term structures under default risk
The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and…
Survival analysis has become a standard approach for modelling time to default by time-varying covariates in credit risk. Unlike most existing methods that implicitly assume a stationary data-generating process, in practise, mortgage…
The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical…
In this paper, we propose a flexible cure rate model with frailty term in latent risk, which is obtained by incorporating a frailty term in risk function of latent competing causes. The number of competing causes of the event of interest…
The additive process generalizes the L\'evy process by relaxing its assumption of time-homogeneous increments and hence covers a larger family of stochastic processes. Recent research in option pricing shows that modeling the underlying log…
This paper considers a variant of the classical Cram\'er-Lundberg model that is particularly appropriate in the credit context, with the distinguishing feature that it corresponds to a finite number of obligors. The focus is on computing…
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 introduce a natural generalization of the forward-starting options, first discussed by M. Rubinstein. The main feature of the contract presented here is that the strike-determination time is not fixed ex-ante, but allowed to be random,…
We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…
This article proposes a method for measuring the latent risks involved in the recovery process of non performing loans in financial institutions and business firms that deal with collection and recovery processes. To that end, we apply the…
In this paper, we performs a credit risk analysis, on the data of past loan applicants of a company named Lending Club. The calculation required the use of exploratory data analysis and machine learning classification algorithms, namely,…
In the paper [Hainaut, D. and Colwell, D.B., {\rm A structural model for credit risk with switching processes and synchronous jumps}, The European Journal of Finance 22(11) (2016): 1040-1062], the authors exploit a synchronous-jump…
We develop a new semantics for defeasible inference based on extended probability measures allowed to take infinitesimal values, on the interpretation of defaults as generalized conditional probability constraints and on a preferred-model…
We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and…
Credit Valuation Adjustment is a balance sheet item which is nowadays subject to active risk management by specialized traders. However, one of the most important risk factors, which is the vector of default intensities of the counterparty,…
This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American…
We construct a no-arbitrage model of bond prices where the long bond is used as a numeraire. We develop bond prices and their dynamics without developing any model for the spot rate or forward rates. The model is arbitrage free and all…
In this paper we develop structural first passage models (AT1P and SBTV) with time-varying volatility and characterized by high tractability, moving from the original work of Brigo and Tarenghi (2004, 2005) [19] [20] and Brigo and Morini…
We introduce a dynamic and stochastic interbank model with an endogenous notion of distress contagion, arising from rational worries about future defaults and ensuing losses. This entails a mark-to-market valuation adjustment for interbank…