Related papers: Dependent Defaults and Losses with Factor Copula M…
A multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration…
The present paper introduces a structural framework to model dependent defaults, with a particular interest in their contagion.
Portfolio's optimal drivers for diversification are common causes of the constituents' correlations. A closed-form formula for the conditional probability of the portfolio given its optimal common drivers is presented, with each pair…
We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the…
The mean-variance portfolio model, based on the risk-return trade-off for optimal asset allocation, remains foundational in portfolio optimization. However, its reliance on restrictive assumptions about asset return distributions limits its…
We present a comprehensive study of graphical log-linear models for contingency tables. High dimensional contingency tables arise in many areas such as computational biology, collection of survey and census data and others. Analysis of…
In this paper we consider the classical and Erlang(2) risk processes when the inter-claim times and claim amounts are dependent. We assume that the dependence structure is defined through a Farlie-Gumbel-Morgenstern (FGM) copula and show…
The recent "correlation breakdown" in the modeling of credit default swaps, in which model correlations had to exceed 100% in order to reproduce market prices of supersenior tranches, is analyzed and argued to be a fundamental market…
This article gives a probabilistic overview of the widely used method of default probability estimation proposed by K. Pluto and D. Tasche. There are listed detailed assumptions and derivation of the inequality where the probability of…
Handling highly dependent data is crucial in clinical trials, particularly in fields related to ophthalmology. Incorrectly specifying the dependency structure can lead to biased inferences. Traditionally, models rely on three fixed…
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…
We propose a multivariate generative model to capture the complex dependence structure often encountered in business and financial data. Our model features heterogeneous and asymmetric tail dependence between all pairs of individual…
In this article, we consider a 2 factors-model for pricing defaultable bond with discrete default intensity and barrier where the 2 factors are stochastic risk free short rate process and firm value process. We assume that the default event…
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…
Parametric copula families have been known to flexibly capture various dependence patterns, e.g., either positive or negative dependence in either the lower or upper tails of bivariate distributions. In this paper, our objective is to…
The structural default model of Lipton and Sepp, 2009 is generalized for a set of banks with mutual interbank liabilities whose assets are driven by correlated Levy processes with idiosyncratic and common components. The multi-dimensional…
We introduce a dynamic model of the default waterfall of derivatives CCPs and propose a risk sensitive method for sizing the initial margin (IM), and the default fund (DF) and its allocation among clearing members. Using a Markovian…
In this paper, we consider bivariate composite models for modeling jointly different types of claims and their associated costs in a flexible manner. For expository purposes, the Gumbel copula is paired with the composite Weibull-Inverse…
In recent years, conditional copulas, that allow dependence between variables to vary according to the values of one or more covariates, have attracted increasing attention. In high dimension, vine copulas offer greater flexibility compared…
Pricing formulae for defaultable corporate bonds with discrete coupons under consideration of the government taxes in the united model of structural and reduced form models are provided. The aim of this paper is to generalize the…