Related papers: Modelling the term-structure of default risk under…
We consider financial networks, where banks are connected by contracts such as debts or credit default swaps. We study the clearing problem in these systems: we want to know which banks end up in a default, and what portion of their…
In this paper we propose a multi-state model for the evaluation of the conversion option contract. The multi-state model is based on age-indexed semi-Markov chains that are able to reproduce many important aspects that influence the…
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…
We study the difference between the level of systemic risk that is empirically measured on an interbank network and the risk that can be deduced from the balance sheets composition of the participating banks. Using generalised DebtRank…
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…
A novel procedure is presented for the objective comparison and evaluation of a bank's decision rules in optimising the timing of loan recovery. This procedure is based on finding a delinquency threshold at which the financial loss of a…
Evaluating the financial performance of manufacturing firms requires consideration of both the time value of money and the relative importance of multiple decision criteria. Conventional approaches relying solely on deterministic…
Many households in developing countries lack formal financial histories, making it difficult for firms to extend credit, and for potential borrowers to receive it. However, many of these households have mobile phones, which generate rich…
This paper examines whether repeated payday loan use, commonly known as the debt trap, harms borrowers' financial wellbeing. Using Open Banking data from 1,815 UK borrowers observed between 2017 and 2018, we model borrowing intensity using…
In life insurance contracts, benefits and premiums are typically paid contingent on the biometric state of the insured. Due to delays between the occurrence, reporting, and settlement of changes to the biometric state, the state process is…
Online leading has disrupted the traditional consumer banking sector with more effective loan processing. Risk prediction and monitoring is critical for the success of the business model. Traditional credit score models fall short in…
Using a comprehensive sample of 2,585 bankruptcies from 1990 to 2019, we benchmark the performance of various machine learning models in predicting financial distress of publicly traded U.S. firms. We find that gradient boosted trees…
This paper investigates the role of high-dimensional information sets in the context of Markov switching models with time varying transition probabilities. Markov switching models are commonly employed in empirical macroeconomic research…
The impact of a stress scenario of default events on the loss distribution of a credit portfolio can be assessed by determining the loss distribution conditional on these events. While it is conceptually easy to estimate loss distributions…
A stochastic model with hidden discrete Markov processes is constructed to understand the behavior of debtors.
Typically, operational risk losses are reported above a threshold. Fitting data reported above a constant threshold is a well known and studied problem. However, in practice, the losses are scaled for business and other factors before the…
This paper explores the mean-variance portfolio selection problem in a multi-period financial market characterized by regime-switching dynamics and uncontrollable liabilities. To address the uncertainty in the decision-making process within…
Over the last decade, nonparametric methods have gained increasing attention for modeling complex data structures due to their flexibility and minimal structural assumptions. In this paper, we study a general multivariate nonparametric…
The purpose of the present paper is to incorporate stochastic interest rates into a matrix-approach to multi-state life insurance, where formulas for reserves, moments of future payments and equivalence premiums can be obtained as explicit…
The paper proposes an original methodology for constructing quantitative statistical models based on multidimensional distribution functions constructed on the basis of the insurance companies' data on inshurance policies (including…