Related papers: Dependent Defaults and Losses with Factor Copula M…
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…
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.…
A standard quantitative method to access credit risk employs a factor model based on joint multivariate normal distribution properties. By extending a one-factor Gaussian copula model to make a more accurate default forecast, this paper…
In actuarial research, a task of particular interest and importance is to predict the loss cost for individual risks so that informative decisions are made in various insurance operations such as underwriting, ratemaking, and capital…
In this paper we present a novel approach for firm default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula constructions. For each considered firm, balance sheet data are used to…
In this paper we propose a copula contagion mixture model for correlated default times. The model includes the well known factor, copula, and contagion models as its special cases. The key advantage of such a model is that we can study the…
A simple graphical model for correlated defaults is proposed, with explicit formulas for the loss distribution. Algebraic geometry techniques are employed to show that this model is well posed for default dependence: it represents any given…
We develop factor copula models for analysing the dependence among mixed continuous and discrete responses. Factor copula models are canonical vine copulas that involve both observed and latent variables, hence they allow tail, asymmetric…
We present a joint copula-based model for insurance claims and sizes. It uses bivariate copulae to accommodate for the dependence between these quantities. We derive the general distribution of the policy loss without the restrictive…
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…
Several collective risk models have recently been proposed by relaxing the widely used but controversial assumption of independence between claim frequency and severity. Approaches include the bivariate copula model, random effect model,…
Analysing dependent risks is an important task for insurance companies. A dependency is reflected in the fact that information about one random variable provides information about the likely distribution of values of another random…
We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…
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…
Copulas have become an important tool in the modern best practice Enterprise Risk Management, often supplanting other approaches to modelling stochastic dependence. However, choosing the `right' copula is not an easy task, and the…
Factor models are a parsimonious way to explain the dependence of variables using several latent variables. In Gaussian 1-factor and structural factor models (such as bi-factor, oblique factor) and their factor copula counterparts, factor…
We propose a new copula model that can be used with replicated spatial data. Unlike the multivariate normal copula, the proposed copula is based on the assumption that a common factor exists and affects the joint dependence of all…
We introduce a model for the loss distribution of a credit portfolio considering a contagion mechanism for the default of names which is the result of two independent components: an infection attempt generated by defaulting entities and a…
We follow a long path for Credit Derivatives and Collateralized Debt Obligations (CDOs) in particular, from the introduction of the Gaussian copula model and the related implied correlations to the introduction of arbitrage-free dynamic…
This paper considers the problem of measuring the credit risk in portfolios of loans, bonds, and other instruments subject to possible default under multi-factor models. Due to the amount of the portfolio, the heterogeneous effect of…