Related papers: Model Risk in Credit Risk
Risk management is very important for individual investors or companies. There are many ways to measure the risk of investment. Prices of risky assets vary rapidly and randomly due to the complexity of finance market. Random interval is a…
The ongoing concern about systemic risk since the outburst of the global financial crisis has highlighted the need for risk measures at the level of sets of interconnected financial components, such as portfolios, institutions or members of…
This article aims to explore an empirical approach to analyze the macroeconomicsdeterminants of default of borrowers. For this purpose, we have measured the impact of the adverse economic conditions on the degradation of the credit…
The increasing availability of advanced computational modelling offers new opportunities to improve safety, efficacy, and emissions reductions. Application of complex models to support engineering decisions has been slow in comparison to…
Parametric statistical methods play a central role in analyzing risk through its underlying frequency and severity components. Given the wide availability of numerical algorithms and high-speed computers, researchers and practitioners often…
In statistics and machine learning, when we train a fitted model on available data, we typically want to ensure that we are searching within a model class that contains at least one accurate model -- that is, we would like to ensure an…
Defect prediction can be a powerful tool to guide the use of quality assurance resources. However, while lots of research covered methods for defect prediction as well as methodological aspects of defect prediction research, the actual cost…
Predicting corporate default risk has long been a crucial topic in the finance field, as bankruptcies impose enormous costs on market participants as well as the economy as a whole. This paper aims to forecast frailty correlated default…
Mean-deviation models, along with the existing theory of coherent risk measures, are well studied in the literature. In this paper, we characterize monotonic mean-deviation (risk) measures from a general mean-deviation model by applying a…
Credit default poses significant challenges to financial institutions and consumers, resulting in substantial financial losses and diminished trust. As such, credit default risk management has been a critical topic in the financial…
Within the framework of maximum entropy principle we show that the finite-size long-range Ising model is the adequate model for the description of homogeneous credit portfolios and the computation of credit risk when default correlations…
In a series of recent papers, Damiano Brigo, Andrea Pallavicini, and co-authors have shown that the value of a contract in a Credit Valuation Adjustment (CVA) setting, being the sum of the cash flows, can be represented as a solution of 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…
Due to the recent increase in interest in Financial Technology (FinTech), applications like credit default prediction (CDP) are gaining significant industrial and academic attention. In this regard, CDP plays a crucial role in assessing the…
The popular systemic risk measure CoVaR (conditional Value-at-Risk) and its variants are widely used in economics and finance. In this article, we propose joint dynamic forecasting models for the Value-at-Risk (VaR) and CoVaR. The CoVaR…
We consider a market model where there are two levels of information. The public information generated by the financial assets, and a larger flow of information that contains additional knowledge about a random time. This random time can…
We introduce the general arbitrage-free valuation framework for counterparty risk adjustments in presence of bilateral default risk, including default of the investor. We illustrate the symmetry in the valuation and show that the adjustment…
This paper presents a new method to assess default risk based on applying the CEV process to the KMV model. We find that the volatility of the firm asset value may not be a constant, so we assume the firm's asset value dynamics are given by…
Determining contributions by sub-portfolios or single exposures to portfolio-wide economic capital for credit risk is an important risk measurement task. Often economic capital is measured as Value-at-Risk (VaR) of the portfolio loss…
In risk management, often the probability must be estimated that a random vector falls into an extreme failure set. In the framework of bivariate extreme value theory, we construct an estimator for such failure probabilities and analyze its…