Related papers: Corporate Default Behavior: A Simple Stochastic Mo…
Corporate failure resonates widely leaving practitioners searching for understanding of default risk. Managers seek to steer away from trouble, credit providers to avoid risky loans and investors to mitigate losses. Applying Topological…
The two main approaches in credit risk are the structural approach pioneered in Merton (1974) and the reduced-form framework proposed in Jarrow & Turnbull (1995) and in Artzner & Delbaen (1995). The goal of this article is to provide a…
In this paper we propose a new nonparametric approach to interacting failing systems (FS), that is systems whose probability of failure is not negligible in a fixed time horizon, a typical example being firms and financial bonds. The main…
The Constant Elasticity of Variance (CEV) model is mathematically presented and then used in a Credit-Equity hybrid framework. Next, we propose extensions to the CEV model with default: firstly by adding a stochastic volatility diffusion…
Extracting from shared resources requires making choices to balance personal profit and sustainability. We present the results of a behavioural experiment wherein we manipulate the default extraction from a finite resource. Participants…
A new procedure is presented for the objective comparison and evaluation of default definitions. This allows the lender to find a default threshold at which the financial loss of a loan portfolio is minimised, in accordance with Basel II.…
This study conducts a benchmarking study, comparing 23 different statistical and machine learning methods in a credit scoring application. In order to do so, the models' performance is evaluated over four different data sets in combination…
We study the problem of system identification for stochastic continuous-time dynamics, based on a single finite-length state trajectory. We present a method for estimating the possibly unstable open-loop matrix by employing properly…
The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…
Proceeding from the concept of rational expectations, a new dynamic model of supply and demand in a single market with one supplier, one buyer, and one kind of commodity is developed. Unlike the cob-web dynamic theories with adaptive…
Credit risk default prediction remains a cornerstone of risk management in the financial industry. The task involves estimating the likelihood that a borrower will fail to meet debt obligations, an objective critical for lending decisions,…
Due to the recent increase in interest in Financial Technology (FinTech), applications like credit default prediction (CDP) are gaining significant industrial and academic attention. In this regard, CDP plays a crucial role in assessing the…
We study a credit risk model which captures effects of economic interactions on a firm's default probability. Economic interactions are represented as a functionally defined graph, and the existence of both cooperative, and competitive,…
This article gives a probabilistic overview of the widely used method of default probability estimation proposed by K. Pluto and D. Tasche. There are listed detailed assumptions and derivation of the inequality where the probability of…
We propose an interacting particle system to model the evolution of a system of banks with mutual exposures. In this model, a bank defaults when its normalized asset value hits a lower threshold, and its default causes instantaneous losses…
In this paper we propose a copula contagion mixture model for correlated default times. The model includes the well known factor, copula, and contagion models as its special cases. The key advantage of such a model is that we can study the…
Economic choices are often stochastic: the same person may make a different choice when facing the same alternatives repeatedly. Standard models assume that the degree of randomness reflects the size of utility differences, but choice…
We propose a model which can be jointly calibrated to the corporate bond term structure and equity option volatility surface of the same company. Our purpose is to obtain explicit bond and equity option pricing formulas that can be…
This paper builds a finite-horizon model to study the role of physical collateral in a model of strategic defaults, when the borrower can develop reputation for honesty. Asset ownership increases attractiveness of the reputational channel:…
This study proposes a tractable stochastic choice model to identify motivations for prosocial behavior, and to explore alternative motivations of deliberate randomization beyond ex-ante fairness concerns. To represent social preferences, we…