Related papers: Copula-Based Factor Model for Credit Risk Analysis
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…
Risk-averse investors often wish to exclude stocks from their portfolios that bear high credit risk, which is a measure of a firm's likelihood of bankruptcy. This risk is commonly estimated by constructing signals from quarterly accounting…
We present a general framework for the estimation of corporate default based on a firm's capital structure, when its assets are assumed to follow a pure jump L\'evy processes; this setup provides a natural extension to usual default metrics…
We study the estimation of a high dimensional approximate factor model in the presence of both cross sectional dependence and heteroskedasticity. The classical method of principal components analysis (PCA) does not efficiently estimate the…
We design a system for risk-analyzing and pricing portfolios of non-performing consumer credit loans. The rapid development of credit lending business for consumers heightens the need for trading portfolios formed by overdue loans as a…
We develop a generalization of the Black-Cox structural model of default risk. The extended model captures uncertainty related to firm's ability to avoid default even if company's liabilities momentarily exceeding its assets. Diffusion in a…
So far, one-factor copulas induce conditional independence with respect to a latent factor. In this paper, we extend one-factor copulas to conditionally dependent models. This is achieved through new representations which allow to build new…
In structural credit risk models, default events and the ensuing losses are both derived from the asset values at maturity. Hence it is of utmost importance to choose a distribution for these asset values which is in accordance with…
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…
A positive correlation between exposure and counterparty credit risk gives rise to the so-called Wrong-Way Risk (WWR). Even after a decade of the financial crisis, addressing WWR in both sound and tractable ways remains challenging.…
This paper explores the dependence modeling of financial assets in a dynamic way and its critical role in measuring risk. Two new methods, called Accelerated Moving Window method and Bottom-up method are proposed to detect the change of…
Time-to-event semi-competing risk endpoints may be correlated when both events are occurring on the same individual. These events and the association between them may also be influenced by individual characteristics. In this paper, we…
We propose a copula based method to handle missing values in multivariate data of mixed types in multilevel data sets. Building upon the extended rank likelihood of \cite{hoff2007extending} and the multinomial probit model, our model is a…
Uncertain information on input parameters of reliability models is usually modeled by considering these parameters as random, and described by marginal distributions and a dependence structure of these variables. In numerous real-world…
A prevalent feature of high-dimensional data is the dependence among covariates, and model selection is known to be challenging when covariates are highly correlated. To perform model selection for the high-dimensional Cox proportional…
In this paper we modify the model of Itkin, Shcherbakov and Veygman, (2019) (ISV2019), proposed for pricing Quanto Credit Default Swaps (CDS) and risky bonds, in several ways. First, it is known since the Lehman Brothers bankruptcy that the…
Managing risk at the aggregate level is crucial for banks and financial institutions as required by the Basel III framework. In this paper, we introduce discrete time Bayesian state space models with Poisson measurements to model aggregate…
Use copula to model dependency of variable extends multivariate gaussian assumption. In this paper we first empirically studied copula regression model with continous response. Both simulation study and real data study are given. Secondly…
In this work, we consider extensions of the dual risk model with proportional gains by introducing a dependence structure between gain sizes and gain interrarrival times. Among others, we further consider the case where the proportional…
This paper provides an alternative approach to Duffie and Lando [Econometrica 69 (2001) 633-664] for obtaining a reduced form credit risk model from a structural model. Duffie and Lando obtain a reduced form model by constructing an economy…