Related papers: Asset correlation estimation for inhomogeneous exp…
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…
We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. This ensemble is set up by Random Matrix Theory. We demonstrate analytically that the presence of correlations…
Properties of weighted averages are studied for the general case that the individual measurements are subject to hidden correlations and have asymmetric statistical as well as systematic errors. Explicit expressions are derived for an…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…
In this paper, we deal with an axiomatic approach to default risk. We introduce the notion of a default risk measure, which generalizes the classical probability of default (PD), and allows to incorporate model risk in various forms. We…
We consider the effect of recovery rates on a pool of credit assets. We allow the recovery rate to depend on the defaults in a general way. Using the theory of large deviations, we study the structure of losses in a pool consisting of a…
We study large deviations and rare default clustering events in a dynamic large heterogeneous portfolio of interconnected components. Defaults come as Poisson events and the default intensities of the different components in the system…
We compare two models of corporate default by calculating the Jeffreys-Kullback-Leibler divergence between their predicted default probabilities when asset correlations are either high or low. Our main results show that the divergence…
Mortgage default prediction is a core task in financial risk management, and machine learning models are increasingly used to estimate default probabilities and provide interpretable signals for downstream decisions. In real-world mortgage…
Interbank contagion can theoretically exacerbate losses in a financial system and lead to additional cascade defaults during downturn. In this paper we produce default analysis using both regression and neural network models to verify…
This paper discusses financial fraud detection in imbalanced dataset using homogeneous and non-homogeneous Poisson processes. The probability of predicting fraud on the financial transaction is derived. Applying our methodology to the…
The purpose of this study is to estimate the correlation structure between multiple assets using financial text analysis. In recent years, as the background of elevating inflation in the global economy and monetary policy tightening by…
This work has the objective of estimating default probabilities and correlations of credit portfolios given default rate information through a Bayesian framework using Stan. We use Vasicek's single factor credit model to establish the…
We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…
Measurement error arises through a variety of mechanisms. A rich literature exists on the bias introduced by covariate measurement error and on methods of analysis to address this bias. By comparison, less attention has been given to errors…
An increasing body of research focuses on using neural networks to model time series. A common assumption in training neural networks via maximum likelihood estimation on time series is that the errors across time steps are uncorrelated.…
Source confusion has been a long-standing problem in the astronomical history. In the previous formulation, sources are assumed to be distributed homogeneously on the sky. This fundamental assumption is not realistic in many applications.…
Environmental epidemiologists are often interested in estimating the effect of time-varying functions of the exposure history on health outcomes. However, the individual exposure measurements that constitute the history upon which an…
Measurement error is a pervasive challenge across many disciplines, yet its impact on sample size determination and the accuracy and precision of estimators regarding the association between an exposure and an outcome remains understudied…
Covered bonds are a specific example of senior secured debt. If the issuer of the bonds defaults the proceeds of the assets in the cover pool are used for their debt service. If in this situation the cover pool proceeds do not suffice for…