Related papers: Modelling corporate defaults: A Markov-switching P…
Risk management is an important practice in the banking industry. In this paper we develop a new methodology to estimate and predict the probability of default (PD) based on the rating transition matrices, which relates the rating…
In the paper, we study a new rate of convergence estimate for homogeneous discrete-time nonlinear Markov chains based on the Markov-Dobrushin condition. This result generalizes the convergence estimates for any positive number of transition…
We consider structural credit modeling in the important special case where the log-leverage ratio of the firm is a time-changed Brownian motion (TCBM) with the time-change taken to be an independent increasing process. Following the…
We analyze the fluctuation of the loss from default around its large portfolio limit in a class of reduced-form models of correlated firm-by-firm default timing. We prove a weak convergence result for the fluctuation process and use it for…
Supply chain disruptions constitute an often underestimated risk for financial stability. As in financial networks, systemic risks in production networks arises when the local failure of one firm impacts the production of others and might…
We show that Poisson regression, though often recommended over log-linear regression for modeling count and other non-negative variables in finance and economics, can be far from optimal when heteroskedasticity and sparsity -- two common…
This paper studies some temporal dependence properties and addresses the issue of parametric estimation for a class of state-dependent autoregressive models for nonlinear time series in which we assume a stochastic autoregressive…
Time series subject to change in regime have attracted much interest in domains such as econometry, finance or meteorology. For discrete-valued regimes, some models such as the popular Hidden Markov Chain (HMC) describe time series whose…
We consider the setting where a collection of time series, modeled as random processes, evolve in a causal manner, and one is interested in learning the graph governing the relationships of these processes. A special case of wide interest…
This paper investigates the finite horizon risk-sensitive portfolio optimization in a regime-switching credit market with physical and information-induced default contagion. It is assumed that the underlying regime-switching process has…
We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…
Survival analysis has become a standard approach for modelling time to default by time-varying covariates in credit risk. Unlike most existing methods that implicitly assume a stationary data-generating process, in practise, mortgage…
Relational data characterized by directed edges with count measurements are common in social science. Most existing methods either assume the count edges are derived from continuous random variables or model the edge dependency by…
We propose a Markov chain model for credit rating changes. We do not use any distributional assumptions on the asset values of the rated companies but directly model the rating transitions process. The parameters of the model are estimated…
We study how the phenomenon of contagion can take place in the network of the world's stock exchanges due to the behavioral trait "blindeness to small changes". On large scale individual, the delay in the collective response may…
We propose a new Bayesian Markov switching regression model for multidimensional arrays (tensors) of binary time series. We assume a zero-inflated logit regression with time-varying parameters and apply it to multilayer temporal networks.…
This paper develops a structural credit risk model to characterize the difference between the economic and recorded default times for a firm. Recorded default occurs when default is recorded in the legal system. The economic default time is…
In recent years research on credit risk modelling has mainly focused on default probabilities. Recovery rates are usually modelled independently, quite often they are even assumed constant. Then, however, the structural connection between…
Multiple systems estimation using a Poisson loglinear model is a standard approach to quantifying hidden populations where data sources are based on lists of known cases. Information criteria are often used for selecting between the large…
We study systemic default contagion in sparse financial networks and develop a framework for deciding when aggregate exposure matrices are reliable and when node-level network information changes tail risk and control design. The first…