Related papers: Dependent Defaults and Losses with Factor Copula M…
It is well-known that the expected scaled maximum of non-negative random variables with unit mean defines a stable tail dependence function associated with some extreme-value copula. In the special case when these random variables are…
We design a system for risk-analyzing and pricing portfolios of non-performing consumer credit loans. The rapid development of credit lending business for consumers heightens the need for trading portfolios formed by overdue loans as a…
This paper introduces a novel stochastic model for credit spreads. The stochastic approach leverages the diffusion of default intensities via a CIR++ model and is formulated within a risk-neutral probability space. Our research primarily…
Thanks to their ability to capture complex dependence structures, copulas are frequently used to glue random variables into a joint model with arbitrary marginal distributions. More recently, they have been applied to solve statistical…
We prove that the default times (or any of their minima) in the dynamic Gaussian copula model of Cr{\'e}pey, Jeanblanc, and Wu (2013) are invariance times in the sense of Cr{\'e}pey and Song (2017), with related invariance probability…
The estimation of dependencies between multiple variables is a central problem in the analysis of financial time series. A common approach is to express these dependencies in terms of a copula function. Typically the copula function is…
We compare observed corporate cumulative default probabilities to those calculated using a stochastic model based on an extension of the work of Black and Cox and find that corporations default as if via diffusive dynamics. The model, based…
Copulas are now frequently used to construct or estimate multivariate distributions because of their ability to take into account the multivariate dependence of the different variables while separately specifying marginal distributions.…
Use copula to model dependency of variable extends multivariate gaussian assumption. In this paper we first empirically studied copula regression model with continous response. Both simulation study and real data study are given. Secondly…
In this paper we discuss a natural extension of infinite discrete partition-of-unity copulas which were recently introduced in the literature to continuous partition of copulas with possible applications in risk management and other fields.…
Copula models are flexible tools to represent complex structures of dependence for multivariate random variables. According to Sklar's theorem (Sklar, 1959), any d-dimensional absolutely continuous density can be uniquely represented as the…
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…
A factor copula model is proposed in which factors are either simulable or estimable from exogenous information. Point estimation and inference are based on a simulated methods of moments (SMM) approach with non-overlapping simulation…
We study the problem of maximizing the probability that (i) an electric component or financial institution $X$ does not default before another component or institution $Y$ and (ii) that $X$ and $Y$ default jointly within the class of all…
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…
This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized…
We construct the COpula Recursive Tree (CORT) estimator: a flexible, consistent, piecewise linear estimator of a copula, leveraging the patchwork copula formalization and various piecewise constant density estimators. While the patchwork…
In the paper we study dynamics of the arbitrage prices of credit default swaps within a hazard process model of credit risk. We derive these dynamics without postulating that the immersion property is satisfied between some relevant…
Most common parametric families of copulas are totally ordered, and in many cases they are also positively or negatively regression dependent and therefore they lead to monotone regression functions, which makes them not suitable for…
This study outlines a comprehensive methodology utilizing copulas to discern inconsistencies in the behavior exhibited by pairs of financial assets. It introduces a robust approach to establishing the interrelationship between the returns…