Related papers: Copula-Based Factor Model for Credit Risk Analysis
This paper considers the problem of measuring the credit risk in portfolios of loans, bonds, and other instruments subject to possible default under multi-factor models. Due to the amount of the portfolio, the heterogeneous effect of…
We prove that the default times (or any of their minima) in the dynamic Gaussian copula model of Cr{\'e}pey, Jeanblanc, and Wu (2013) are invariance times in the sense of Cr{\'e}pey and Song (2017), with related invariance probability…
We develop factor copula models for analysing the dependence among mixed continuous and discrete responses. Factor copula models are canonical vine copulas that involve both observed and latent variables, hence they allow tail, asymmetric…
The classical reduced-form and filtration expansion framework in credit risk is extended to the case of multiple, non-ordered defaults, assuming that conditional densities of the default times exist. Intensities and pricing formulas are…
Credit scoring is an essential tool used by global financial institutions and credit lenders for financial decision making. In this paper, we introduce a new method based on Gaussian Mixture Model (GMM) to forecast the probability of…
The present paper provides a multi-period contagion model in the credit risk field. Our model is an extension of Davis and Lo's infectious default model. We consider an economy of n firms which may default directly or may be infected by…
We follow a long path for Credit Derivatives and Collateralized Debt Obligations (CDOs) in particular, from the introduction of the Gaussian copula model and the related implied correlations to the introduction of arbitrage-free dynamic…
We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events…
Since the Great Financial Crisis (GFC), the use of stress tests as a tool for assessing the resilience of financial institutions to adverse financial and economic developments has increased significantly. One key part in such exercises is…
We propose a new copula model that can be used with replicated spatial data. Unlike the multivariate normal copula, the proposed copula is based on the assumption that a common factor exists and affects the joint dependence of all…
Credit risk assessment is a crucial aspect of financial decision-making, enabling institutions to predict the likelihood of default and make informed lending decisions. Two prominent methodologies in credit risk modeling are logistic…
We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…
A simple graphical model for correlated defaults is proposed, with explicit formulas for the loss distribution. Algebraic geometry techniques are employed to show that this model is well posed for default dependence: it represents any given…
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…
In conditional copula models, the copula parameter is deterministically linked to a covariate via the calibration function. The latter is of central interest for inference and is usually estimated nonparametrically. However, when a…
We propose a new class of extreme-value copulas which are extreme-value limits of conditional normal models. Conditional normal models are generalizations of conditional independence models, where the dependence among observed variables is…
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…
The estimation of dependencies between multiple variables is a central problem in the analysis of financial time series. A common approach is to express these dependencies in terms of a copula function. Typically the copula function is…
Credit capital requirements in Internal Rating Based approaches require the calibration of two key parameters: the probability of default and the loss-given-default. This letter considers the uncertainty about these two parameters and…
In this paper, we study large losses arising from defaults of a credit portfolio. We assume that the portfolio dependence structure is modelled by the Archimedean copula family as opposed to the widely used Gaussian copula. The resulting…