Related papers: Concurrent Credit Portfolio Losses
The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence it is of utmost importance to study the mutual dependence of losses for different creditors in…
This paper presents comparison results and establishes risk bounds for credit portfolios within classes of Bernoulli mixture models, assuming conditionally independent defaults that are stochastically increasing with a common risk factor.…
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…
In this paper, we study large losses arising from defaults of a credit portfolio. We assume that the portfolio dependence structure is modelled by the Archimedean copula family as opposed to the widely used Gaussian copula. The resulting…
We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest…
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…
Financial crises are usually associated with increased cross-sectional dependence between asset returns, causing asymmetry between the lower and upper tail of return distribution. The detection of asymmetric dependence is now understood to…
The risk of a credit portfolio depends crucially on correlations between the probability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the…
When assets are correlated, benefits of investment diversification are reduced. To measure the influence of correlations on investment performance, a new quantity - the effective portfolio size - is proposed and investigated in both…
We propose a credit risk model for portfolios composed of green and brown loans, extending the ASRF framework via a two-factor copula structure. Systematic risk is modeled using potentially skewed distributions, allowing for asymmetric…
Using one of the key property of copulas that they remain invariant under an arbitrary monotonous change of variable, we investigate the null hypothesis that the dependence between financial assets can be modeled by the Gaussian copula. We…
We study the impact of contagion in a network of firms facing credit risk. We describe an intensity based model where the homogeneity assumption is broken by introducing a random environment that makes it possible to take into account the…
This paper presents a new copula to model dependencies between insurance entities, by considering how insurance entities are affected by both macro and micro factors. The model used to build the copula assumes that the insurance losses of…
Individual risk models need to capture possible correlations as failing to do so typically results in an underestimation of extreme quantiles of the aggregate loss. Such dependence modelling is particularly important for managing credit…
We consider two different portfolios of proportional reinsurance of the same pool of risks. This contribution is concerned with Gaussian-like risks, which means that for large values the survival function of such risks is, up to a…
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…
As it is known in the finance risk and macroeconomics literature, risk-sharing in large portfolios may increase the probability of creation of default clusters and of systemic risk. We review recent developments on mathematical and…
This paper generalizes Moody's correlated binomial default distribution for homogeneous (exchangeable) credit portfolio, which is introduced by Witt, to the case of inhomogeneous portfolios. As inhomogeneous portfolios, we consider two…
We study a simple, solvable model that allows us to investigate effects of credit contagion on the default probability of individual firms, in both portfolios of firms and on an economy wide scale. While the effect of interactions may be…
We propose a Gaussian-copula-based framework that learns deal-level dependence directly from observed joint success frequencies across founder, geography, and market attributes. Holding marginal deal success probabilities fixed, deal-level…