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We propose a new class of extreme-value copulas which are extreme-value limits of conditional normal models. Conditional normal models are generalizations of conditional independence models, where the dependence among observed variables is…
Longitudinal and survival sub-models are two building blocks for joint modelling of longitudinal and time to event data. Extensive research indicates separate analysis of these two processes could result in biased outputs due to their…
Discovering causal relations among observed variables in a given data set is a main topic in studies of statistics and artificial intelligence. Recently, some techniques to discover an identifiable causal structure have been explored based…
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…
In this paper we present a novel approach for firm default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula constructions. For each considered firm, balance sheet data are used to…
We study the connection between probability distributions satisfying certain conditional independence (CI) constraints, and point and line arrangements in incidence geometry. To a family of CI statements, we associate a polynomial ideal…
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 the pricing of European-style structured credit payoff in a static framework, where the underlying default times are independent given a common factor. A practical application would consist of the pricing of nth-to-default…
We describe a basic correspondence between linear algebraic structures within vector embeddings in artificial neural networks and conditional independence constraints on the probability distributions modeled by these networks. Our framework…
Many types of bounded data defined on the unit interval arise naturally as ratios of the form $X/(X + Y)$. In the existing literature, the main statistical models proposed for this type of bounded data typically based on the assumption that…
The present paper provides a multi-period contagion model in the credit risk field. Our model is an extension of Davis and Lo's infectious default model. We consider an economy of n firms which may default directly or may be infected by…
A framework for quantifying dependence between random vectors is introduced. With the notion of a collapsing function, random vectors are summarized by single random variables, called collapsed random variables in the framework. Using this…
Structural causal models postulate noisy functional relations among a set of interacting variables. The causal structure underlying each such model is naturally represented by a directed graph whose edges indicate for each variable which…
Interbank contagion can theoretically exacerbate losses in a financial system and lead to additional cascade defaults during downturn. In this paper we produce default analysis using both regression and neural network models to verify…
We consider linear structural equation models that are associated with mixed graphs. The structural equations in these models only involve observed variables, but their idiosyncratic error terms are allowed to be correlated and…
This paper introduces a novel stochastic model for credit spreads. The stochastic approach leverages the diffusion of default intensities via a CIR++ model and is formulated within a risk-neutral probability space. Our research primarily…
Graphical models can represent a multivariate distribution in a convenient and accessible form as a graph. Causal models can be viewed as a special class of graphical models that not only represent the distribution of the observed system…
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…
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…
There are growing concerns for reserves estimation of incurred but not reported (IBNR) claims in actuarial sciences. In this paper, we propose a copula-based dependency model to capture the relationship between two main IBNR reserve…