Related papers: Corporate Default Behavior: A Simple Stochastic Mo…

The issue of model risk in default modeling has been known since inception of the Academic literature in the field. However, a rigorous treatment requires a description of all the possible models, and a measure of the distance between a…

We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model…

We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…

Predicting corporate default risk has long been a crucial topic in the finance field, as bankruptcies impose enormous costs on market participants as well as the economy as a whole. This paper aims to forecast frailty correlated default…

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…

A direct method for calculating default rates by industry and target corporate segments is not possible given the lack of statistical data. The proposed paper considers a model for filtering the dynamics of the probability of default of…

Banks and financial institutions all over the world manage portfolios containing tens of thousands of customers. Not all customers are high credit-worthy, and many possess varying degrees of risk to the Bank or financial institutions that…

Credit risk assessment of a company is commonly conducted by utilizing financial ratios that are derived from its financial statements. However, this approach may not fully encompass other significant aspects of a company. We propose the…

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…

Credit risk scorecards are logistic regression models, fitted to large and complex data sets, employed by the financial industry to model the probability of default of a potential customer. In order to ensure that a scorecard remains a…

The current research on credit risk is primarily focused on modeling default probabilities. Recovery rates are often treated as an afterthought; they are modeled independently, in many cases they are even assumed constant. This is despite…

The increasing development in the consumer credit card market brings substantial regulatory and risk management challenges. The advanced machine learning models applications bring concerns about model transparency and fairness for both…

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,…

Evaluation of default correlation is an important task in credit risk analysis. In many practical situations, it concerns the joint defaults of several correlated firms, the task that is reducible to a first passage time (FPT) problem. This…

Survival analysis has become a standard approach for modelling time to default by time-varying covariates in credit risk. Unlike most existing methods that implicitly assume a stationary data-generating process, in practise, mortgage…

In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…

Filiz et al. (2008) proposed a model for the pattern of defaults seen among a group of firms at the end of a given time period. The ingredients in the model are a graph, where the vertices correspond to the firms and the edges describe the…

We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…

In recent years research on credit risk modelling has mainly focused on default probabilities. Recovery rates are usually modelled independently, quite often they are even assumed constant. Then, however, the structural connection between…

The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…