Related papers: Bayesian Estimation of Corporate Default Spreads

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…

Loan default prediction is one of the most important and critical problems faced by banks and other financial institutions as it has a huge effect on profit. Although many traditional methods exist for mining information about a loan…

Researchers have constantly asked whether stock returns can be predicted by some macroeconomic data. However, it is known that macroeconomic data may exhibit nonstationarity and/or heavy tails, which complicates existing testing procedures…

We propose a unified framework for equity and credit risk modeling, where the default time is a doubly stochastic random time with intensity driven by an underlying affine factor process. This approach allows for flexible interactions…

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…

In this paper, we study large losses arising from defaults of a credit portfolio. We assume that the portfolio dependence structure is modelled by the Archimedean copula family as opposed to the widely used Gaussian copula. The resulting…

Assessment of risk levels for existing credit accounts is important to the implementation of bank policies and offering financial products. This paper uses cluster analysis of behaviour of credit card accounts to help assess credit risk…

This paper is a contribution to the Proceedings of the Workshop Complexity, Metastability and Nonextensivity held in Erice 20-26 July 2004, to be published by World Scientific. We propose a generalization to Merton's model for evaluating…

We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events…

As several studies have shown, predicting credit risk is still a major concern for the financial services industry and is receiving a lot of scholarly interest. This area of study is crucial because it aids financial organizations in…

We apply multiple testing procedures to the validation of estimated default probabilities in credit rating systems. The goal is to identify rating classes for which the probability of default is estimated inaccurately, while still…

We study how the climate transition through a low-carbon economy, implemented by carbon pricing, propagates in a credit portfolio and precisely describe how carbon price dynamics affects credit risk measures such as probability of default,…

We model the term structure of the forward default intensity and the default density by using L\'evy random fields, which allow us to consider the credit derivatives with an after-default recovery payment. As applications, we study the…

The special and important problems of default prediction for municipal bonds are addressed using a combination of text embeddings from a pre-trained transformer network, a fully connected neural network, and synthetic oversampling. The…

Financial networks are typically estimated by applying standard time series analyses to price-based economic variables collected at low-frequency (e.g., daily or monthly stock returns or realized volatility). These networks are used for…

Spreadsheets are ubiquitous in business with the financial sector particularly heavily reliant on the technology. It is known that the level of spreadsheet error can be high and that it is often necessary to review spreadsheets based on a…

Parametric Portfolio Policies (PPP) estimate optimal portfolio weights directly as functions of observable signals by maximizing expected utility, bypassing the need to model asset returns and covariances. However, PPP ignores policy risk.…

In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…

This paper studies how international investors' concerns about model misspecification affect sovereign bond spreads. We develop a general equilibrium model of sovereign debt with endogenous default wherein investors fear that the…

This paper concerns sequential computation of risk measures for financial data and asks how, given a risk measurement procedure, we can tell whether the answers it produces are `correct'. We draw the distinction between `external' and…