Related papers: Modelling corporate defaults: A Markov-switching P…
Credit risk assessment of a company is commonly conducted by utilizing financial ratios that are derived from its financial statements. However, this approach may not fully encompass other significant aspects of a company. We propose the…
We find that factors explaining bank loan recovery rates vary depending on the state of the economic cycle. Our modeling approach incorporates a two-state Markov switching mechanism as a proxy for the latent credit cycle, helping to explain…
Mixed Probit models are widely applied in many fields where prediction of a binary response is of interest. Typically, the random effects are assumed to be independent but this is seldom the case for many real applications. In the credit…
Important models in insurance, for example the Carm{\'e}r--Lundberg theory and the Sparre Andersen model, essentially rely on the Poisson process. The process is used to model arrival times of insurance claims. This paper extends the…
In this paper we study limit behavior for a Markov-modulated (MM) binomial counting process, also called a binomial counting process under regime switching. Such a process naturally appears in the context of credit risk when multiple…
Understanding the stability and long-time behavior of generative models is a fundamental problem in modern machine learning. This paper provides quantitative bounds on the sampling error of score-based generative models by leveraging…
While defaults are rare events, losses can be substantial even for credit portfolios with a large number of contracts. Therefore, not only a good evaluation of the probability of default is crucial, but also the severity of losses needs to…
Solomon and Golo [1] have recently proposed an autocatalytic (self-reinforcing) feedback model which couples a macroscopic system parameter (the interest rate), a microscopic parameter that measures the distribution of the states of the…
This study considers the Merton model with temporal correlation. We show the Merton model becomes Poisson process with the log-normal distributed intensity function in the limit. We discuss the relation between this model and Hawkes…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
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…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…
In a dual risk model, the premiums are considered as the costs and the claims are regarded as the profits. The surplus can be interpreted as the wealth of a venture capital, whose profits depend on research and development. In most of the…
Multi-state models are frequently applied for representing processes evolving through a discrete set of state. Important classes of multi-state models arise when transitions between states may depend on the time since entry into the current…
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…
Suppose an online platform wants to compare a treatment and control policy, e.g., two different matching algorithms in a ridesharing system, or two different inventory management algorithms in an online retail site. Standard randomized…
We develop a model for contagion in reinsurance networks by which primary insurers' losses are spread through the network. Our model handles general reinsurance contracts, such as typical excess of loss contracts. We show that simpler…
In this paper we propose a new time-varying econometric model, called Time-Varying Poisson AutoRegressive with eXogenous covariates (TV-PARX), suited to model and forecast time series of counts. {We show that the score-driven framework is…
In this paper we develop a novel hidden Markov graphical model to investigate time-varying interconnectedness between different financial markets. To identify conditional correlation structures under varying market conditions and…