Related papers: Robust Bernoulli Mixture Models for Credit Portfol…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
Joint multivariate longitudinal and time-to-event data are gaining increasing attention in the biomedical sciences where subjects are followed over time to monitor the progress of a disease or medical condition. In the insurance context,…
This article proposes a method for measuring the latent risks involved in the recovery process of non performing loans in financial institutions and business firms that deal with collection and recovery processes. To that end, we apply the…
The lifetime behaviour of loans is notoriously difficult to model, which can compromise a bank's financial reserves against future losses, if modelled poorly. Therefore, we present a data-driven comparative study amongst three techniques in…
Valuation of Credit Valuation Adjustment (CVA) has become an important field as its calculation is required in Basel III, issued in 2010, in the wake of the credit crisis. Exposure, which is defined as the potential future loss of a default…
A typical situation in competing risks analysis is that the researcher is only interested in a subset of risks. This paper considers a depending competing risks model with the distribution of one risk being a parametric or semi-parametric…
This paper proposes a portfolio construction framework designed to remain robust under estimation error, non-stationarity, and realistic trading constraints. The methodology combines dynamic asset eligibility, deterministic rebalancing, and…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
Default risk calculus plays a crucial role in portfolio optimization when the risky asset is under threat of bankruptcy. However, traditional stochastic control techniques are not applicable in this scenario, and additional assumptions are…
We present two methodologies on the estimation of rating transition probabilities within Markov and non-Markov frameworks. We first estimate a continuous-time Markov chain using discrete (missing) data and derive a simpler expression for…
In this paper, we address risk aggregation and capital allocation problems in the presence of dependence between risks. The dependence structure is defined by a mixed Bernstein copula which represents a generalization of the well-known…
In this paper, we solve portfolio rebalancing problem when security returns are represented by uncertain variables considering transaction costs. The performance of the proposed model is studied using constant-proportion portfolio insurance…
Effective credit risk management is fundamental to financial decision-making, requiring robust models to predict default probabilities and classify financial entities. Traditional machine learning approaches face significant challenges when…
The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and…
We present a multilayer network model for credit risk assessment. Our model accounts for multiple connections between borrowers (such as their geographic location and their economic activity) and allows for explicitly modelling the…
We study the impact of contagion in a network of firms facing credit risk. We describe an intensity based model where the homogeneity assumption is broken by introducing a random environment that makes it possible to take into account the…
There is empirical evidence that recovery rates tend to go down just when the number of defaults goes up in economic downturns. This has to be taken into account in estimation of the capital against credit risk required by Basel II to cover…
Dependence among multiple lifetimes is a key factor for pricing and evaluating the risk of joint life insurance products. The dependence structure can be exposed to model uncertainty when available data and information are limited. We…
The study of dependence between random variables under external influences is a challenging problem in multivariate analysis. We address this by proposing a novel semi-parametric approach for conditional copula models using Bayesian…
We consider the pricing of European-style structured credit payoff in a static framework, where the underlying default times are independent given a common factor. A practical application would consist of the pricing of nth-to-default…