Related papers: Spurious Default Probability Projections in Credit…
In this article we consider the parameter risk in the context of internal modelling of the reserve risk under Solvency II. We discuss two opposed perspectives on parameter uncertainty and point out that standard methods of classical…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the…
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…
The notion of a credit spread curve is fundamental in fixed income investing, but in practice it is not `given' and needs to be constructed from bond prices either for a particular issuer, or for a sector rating-by-rating. Rather than…
Applying software defect esimation techniques and presenting this information in a compact and impactful decision table can clearly illustrate to collaborative groups how critical this position is in the overall development cycle. The Test…
In this paper, we present a unified framework for decision making under uncertainty. Our framework is based on the composite of two risk measures, where the inner risk measure accounts for the risk of decision given the exact distribution…
We extend the Vasi\v{c}ek loan portfolio model to a setting where liabilities fluctuate randomly and asset values may be subject to systemic jump risk. We derive the probability distribution of the percentage loss of a uniform portfolio and…
There are many studies on development of models for analyzing some derivatives such as credit default swaps .
The increasing development in the consumer credit card market brings substantial regulatory and risk management challenges. The advanced machine learning models applications bring concerns about model transparency and fairness for both…
Under the International Financial Reporting Standards (IFRS) 9, credit losses ought to be recognised timeously and accurately. This requirement belies a certain degree of dynamicity when estimating the constituent parts of a credit loss…
A new procedure is presented for the objective comparison and evaluation of default definitions. This allows the lender to find a default threshold at which the financial loss of a loan portfolio is minimised, in accordance with Basel II.…
In this paper we develop a tractable structural model with analytical default probabilities depending on some dynamics parameters, and we show how to calibrate the model using a chosen number of Credit Default Swap (CDS) market quotes. We…
This paper introduces a credit risk rating model for credit risk assessment in quantitative finance, aiming to categorize borrowers based on their behavioral data. The model is trained on data from Experian, a widely recognized credit…
In the last years, increasing efforts have been put into the development of effective stress tests to quantify the resilience of financial institutions. Here we propose a stress test methodology for central counterparties based on a network…
The study of systemic risk is often presented through the analysis of several measures referring to quantities used by practitioners and policy makers. Almost invariably, those measures evaluate the size of the impact that exogenous events…
We introduce methodology to bridge scenario analysis and model-based risk forecasting, leveraging their respective strengths in policy settings. Our Bayesian framework addresses the fundamental challenge of reconciling judgmental narrative…
Electricity systems are experiencing increased effects of randomness and variability due to emerging stochastic assets. The increased effects introduce new uncertainties into power systems that can impact system operability and reliability.…
In model-based testing (MBT) we may have to deal with a non-deterministic model, e.g. because abstraction was applied, or because the software under test itself is non-deterministic. The same test case may then trigger multiple possible…
Load forecasts have become an integral part of energy security. Due to the various influencing factors that can be considered in such a forecast, there is also a wide range of models that attempt to integrate these parameters into a system…