Related papers: Robust Bernoulli Mixture Models for Credit Portfol…
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 introduce a model for the loss distribution of a credit portfolio considering a contagion mechanism for the default of names which is the result of two independent components: an infection attempt generated by defaulting entities and a…
We obtain an explicit formula for the bilateral counterparty valuation adjustment of a credit default swaps portfolio referencing an asymptotically large number of entities. We perform the analysis under a doubly stochastic intensity…
The family of admissible positions in a transaction costs model is a random closed set, which is convex in case of proportional transaction costs. However, the convexity fails, e.g. in case of fixed transaction costs or when only a finite…
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…
Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is…
We investigate the impact of available information on the estimation of the default probability within a generalized structural model for credit risk. The traditional structural model where default is triggered when the value of the firm's…
Portfolio's optimal drivers for diversification are common causes of the constituents' correlations. A closed-form formula for the conditional probability of the portfolio given its optimal common drivers is presented, with each pair…
A model is developed to assess the profitability of loans or mortgages with a specified repayment schedule. Financial institutions face two competing risks: default and prepayment, both influenced by the stochastic evolution of credit…
Understanding the dependence relationship of credit spreads of corporate bonds is important for risk management. Vine copula models with tail dependence are used to analyze a credit spread dataset of Chinese corporate bonds, understand the…
Evaluation of default correlation is an important task in credit risk analysis. In many practical situations, it concerns the joint defaults of several correlated firms, the task that is reducible to a first passage time (FPT) problem. This…
This article gives a probabilistic overview of the widely used method of default probability estimation proposed by K. Pluto and D. Tasche. There are listed detailed assumptions and derivation of the inequality where the probability of…
In this paper we present a Bayesian competing risk proportional hazards model to describe mortgage defaults and prepayments. We develop Bayesian inference for the model using Markov chain Monte Carlo methods. Implementation of the model is…
In this article, a copula-based method for mixed regression models is proposed, where the conditional distribution of the response variable, given covariates, is modelled by a parametric family of continuous or discrete distributions, and…
Fully describing the entire data set is essential in multivariate risk assessment, since moderate levels of one variable can influence another, potentially leading it to be extreme. Additionally, modelling both non-extreme and extreme…
Model risk in credit portfolio models is a serious issue for banks but has so far not been tackled comprehensively. We will demonstrate how to deal with uncertainty in all model parameters in an all-embracing, yet easy-to-implement way.
We offer a new perspective on risk aggregation with FGM copulas. Along the way, we discover new results and revisit existing ones, providing simpler formulas than one can find in the existing literature. This paper builds on two novel…
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…
Latent variable models are frequently used to identify structure in dichotomous network data, in part because they give rise to a Bernoulli product likelihood that is both well understood and consistent with the notion of exchangeable…
Based on supermodularity ordering properties, we show that convex risk measures of credit losses are nondecreasing w.r.t. credit-credit and, in a wrong-way risk setup, credit-market, covariances of elliptically distributed latent factors.…