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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 deal with an axiomatic approach to default risk. We introduce the notion of a default risk measure, which generalizes the classical probability of default (PD), and allows to incorporate model risk in various forms. We…

Many failure mechanisms of machinery are closely related to the behavior of condition monitoring (CM) signals. To achieve a cost-effective preventive maintenance strategy, accurate remaining useful life (RUL) prediction based on the signals…

The lifetime behaviour of loans is notoriously difficult to model, which can compromise a bank's financial reserves against future losses, if modelled poorly. Therefore, we present a data-driven comparative study amongst three techniques in…

Diffusion in a linear potential in the presence of position-dependent killing is used to mimic a default process. Different assumptions regarding transport coefficients, initial conditions, and elasticity of the killing measure lead to…

Credit default poses significant challenges to financial institutions and consumers, resulting in substantial financial losses and diminished trust. As such, credit default risk management has been a critical topic in the financial…

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…

This paper considers the problem of measuring the credit risk in portfolios of loans, bonds, and other instruments subject to possible default under multi-factor models. Due to the amount of the portfolio, the heterogeneous effect of…

A standard quantitative method to access credit risk employs a factor model based on joint multivariate normal distribution properties. By extending a one-factor Gaussian copula model to make a more accurate default forecast, this paper…

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…

Whereas traditional credit scoring tends to employ only individual borrower- or loan-level predictors, it has been acknowledged for some time that connections between borrowers may result in default risk propagating over a network. In this…

This paper develops a continuous-time filtering framework for estimating a hazard rate subject to an unobservable change-point. This framework naturally arises in both financial and insurance applications, where the default intensity of a…

The aim of this article is to analyze data from multiple repairable systems under the presence of dependent competing risks. In order to model this dependence structure, we adopted the well-known shared frailty model. This model provides a…

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…

This paper proposes a new fuzzy assessing procedure with application in management decision making. The proposed fuzzy approach build the membership functions for system characteristics of a standby repairable system. This method is used to…

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 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…

The existence of asymmetric information has always been a major concern for financial institutions. Financial intermediaries such as commercial banks need to study the quality of potential borrowers in order to make their decision on…

In the pursuit of modelling a loan's probability of default (PD) over its lifetime, repeat default events are often ignored when using Cox Proportional Hazard (PH) models. Excluding such events may produce biased and inaccurate…

In this paper we consider a reduced-form intensity-based credit risk model with a hidden Markov state process. A filtering method is proposed for extracting the underlying state given the observation processes. The method may be applied to…