Related papers: Robust Bernoulli Mixture Models for Credit Portfol…
The paper deals with a generalization of the risk model with stochastic premiums where dependence structures between claim sizes and inter-claim times as well as premium sizes and inter-premium times are modeled by…
We present the qGaussian generalization of the Merton framework, which takes into account slow fluctuations of the volatility of the firms market value of financial assets. The minimal version of the model depends on the Tsallis entropic…
This paper develops the Jungle model in a credit portfolio framework. The Jungle model is able to model credit contagion, produce doubly-peaked probability distributions for the total default loss and endogenously generate quasi phase…
In this work, we consider the notion of "criterion collapse," in which optimization of one metric implies optimality in another, with a particular focus on conditions for collapse into error probability minimizers under a wide variety of…
The estimation of dependencies between multiple variables is a central problem in the analysis of financial time series. A common approach is to express these dependencies in terms of a copula function. Typically the copula function is…
Recent financial disasters have emphasised the need to accurately predict extreme financial losses and their consequences for the institutions belonging to a given financial market. The ability of econometric models to predict extreme…
Prior to the financial crisis mortgage securitization models increased in sophistication as did products built to insure against losses. Layers of complexity formed upon a foundation that could not support it and as the foundation crumbled…
Inference on vertex-aligned graphs is of wide theoretical and practical importance.There are, however, few flexible and tractable statistical models for correlated graphs, and even fewer comprehensive approaches to parametric inference on…
The key result of this paper is to characterize all the multivariate symmetric Bernoulli distributions whose sum is minimal under convex order. In doing so, we automatically characterize extremal negative dependence among Bernoulli random…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
We develop a dynamic point process model of correlated default timing in a portfolio of firms, and analyze typical default profiles in the limit as the size of the pool grows. In our model, a firm defaults at a stochastic intensity that is…
A new notion of stochastic ordering is introduced to compare multivariate stochastic risk models with respect to extreme portfolio losses. In the framework of multivariate regular variation comparison criteria are derived in terms of…
We present a simple model of firm rating evolution. We consider two sources of defaults: individual dynamics of economic development and Potts-like interactions between firms. We show that such a defined model leads to phase transition,…
This paper develops a two-dimensional structural framework for valuing credit default swaps and corporate bonds in the presence of default contagion. Modelling the values of related firms as correlated geometric Brownian motions with…
The existence of asymmetric information has always been a major concern for financial institutions. Financial intermediaries such as commercial banks need to study the quality of potential borrowers in order to make their decision on…
We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…
This work focuses on financial risks from a probabilistic point of view. The value of a firm is described as a geometric Brownian motion and default emerges as a first passage time event. On the technical side, the critical threshold that…
This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…
We introduce an innovative theoretical framework to model derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on Credit and Debit…
We apply Geometric Arbitrage Theory to obtain results in mathematical finance for credit markets, which do not need stochastic differential geometry in their formulation. We obtain closed form equations involving default intensities and…