Related papers: Robust Bernoulli Mixture Models for Credit Portfol…
Using one of the key property of copulas that they remain invariant under an arbitrary monotonous change of variable, we investigate the null hypothesis that the dependence between financial assets can be modeled by the Gaussian copula. We…
We consider a multivariate default system where random environmental information is available. We study the dynamics of the system in a general setting and adopt the point of view of change of probability measures. We also make a link with…
In theory, the probabilistic linkage method provides two distinct advantages over non-probabilistic methods, including minimal rates of linkage error and accurate measures of these rates for data users. However, implementations can fall…
In this paper, we performs a credit risk analysis, on the data of past loan applicants of a company named Lending Club. The calculation required the use of exploratory data analysis and machine learning classification algorithms, namely,…
The ability to adequately model risks is crucial for insurance companies. The method of "Copula-based hierarchical risk aggregation" by Arbenz et al. offers a flexible way in doing so and has attracted much attention recently. We briefly…
Longitudinal and survival sub-models are two building blocks for joint modelling of longitudinal and time to event data. Extensive research indicates separate analysis of these two processes could result in biased outputs due to their…
Time-to-event data are often recorded on a discrete scale with multiple, competing risks as potential causes for the event. In this context, application of continuous survival analysis methods with a single risk suffer from biased…
In this paper, we discuss the ambiguous chance constrained based portfolio optimization problems, in which the perturbations associated with the input parameters are stochastic in nature, but their distributions are not known precisely. We…
Credit default prediction is a tabular learning problem with severe class imbalance, heterogeneous features, and tight latency budgets. Tabular Foundation Models (TFMs) approach this problem through in-context learning, which makes their…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
We consider an approach to credit risk in which the information about the time of bankruptcy is modelled using a Brownian bridge that starts at zero and is conditioned to equal zero when the default occurs. This raises the question whether…
Measuring the corporate default risk is broadly important in economics and finance. Quantitative methods have been developed to predictively assess future corporate default probabilities. However, as a more difficult yet crucial problem,…
The benefits of diversifying risks are difficult to estimate quantitatively because of the uncertainties in the dependence structure between the risks. Also, the modelling of multidimensional dependencies is a non-trivial task. This paper…
Using particle system methodologies we study the propagation of financial distress in a network of firms facing credit risk. We investigate the phenomenon of a credit crisis and quantify the losses that a bank may suffer in a large credit…
In the pursuit of modelling a loan's probability of default (PD) over its lifetime, repeat default events are often ignored when using Cox Proportional Hazard (PH) models. Excluding such events may produce biased and inaccurate…
In this paper, we consider the chance constrained based uncertain portfolio optimization problem in which the uncertain parameters are stochastic in nature. The primary goal of the work is to formulate the uncertain problem into a…
The Basel II internal ratings-based (IRB) approach to capital adequacy for credit risk plays an important role in protecting the Australian banking sector against insolvency. We outline the mathematical foundations of regulatory capital for…
A clearing member of a Central Counterparty (CCP) is exposed to losses on their default fund and initial margin contributions. Such losses can be incurred whenever the CCP has insufficient funds to unwind the portfolio of a defaulting…
This article extends the literature on copulas with discrete or continuous marginals to the case where some of the marginals are a mixture of discrete and continuous components. We do so by carefully defining the likelihood as the density…
This paper considers the difference of stop-loss payoffs where the underlying is a difference of two random variables. The goal is to study whether the comonotonic and countermonotonic modifications of those two random variables can be used…