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Author : Melanie Ilg
Publisher :
ISBN 13 :
Total Pages : 176 pages
Book Rating : 4.:/5 (314 download)
Download or read book Structural Credit Risk Models with Incomplete Information about the Firm's Assets written by Melanie Ilg and published by . This book was released on 2003 with total page 176 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Tomasz R. Bielecki
Publisher : Springer Science & Business Media
ISBN 13 : 3662048213
Total Pages : 517 pages
Book Rating : 4.6/5 (62 download)
Download or read book Credit Risk: Modeling, Valuation and Hedging written by Tomasz R. Bielecki and published by Springer Science & Business Media. This book was released on 2013-03-14 with total page 517 pages. Available in PDF, EPUB and Kindle. Book excerpt: The motivation for the mathematical modeling studied in this text on developments in credit risk research is the bridging of the gap between mathematical theory of credit risk and the financial practice. Mathematical developments are covered thoroughly and give the structural and reduced-form approaches to credit risk modeling. Included is a detailed study of various arbitrage-free models of default term structures with several rating grades.
Author : Frank Fabozzi
Publisher : McGraw Hill Professional
ISBN 13 : 0071715304
Total Pages : 24 pages
Book Rating : 4.0/5 (717 download)
Download or read book The Handbook of Fixed Income Securities, Chapter 33 - Credit Risk Modeling written by Frank Fabozzi and published by McGraw Hill Professional. This book was released on 2005-04-15 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: From The Handbook of Fixed Income Securities--the most authoritative, widely read reference in the global fixed income marketplace--comes this sample chapter. This comprehensive survey of current knowledge features contributions from leading academics and practitioners and is not equaled by any other single sourcebook. Now, the thoroughly revised and updated seventh edition gives you the facts and formulas you need to compete in today's transformed marketplace. It places increased emphasis on applications, electronic trading, and global portfolio management.
Author : Agostino Capponi
Publisher :
ISBN 13 :
Total Pages : 29 pages
Book Rating : 4.:/5 (129 download)
Download or read book Credit Risk Modeling with Misreporting and Incomplete Information written by Agostino Capponi and published by . This book was released on 2009 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a structural model for the valuation of defaultable securities of a firm which models the effect of deliberate misreporting done by insiders in the firm and unobserved by others. We derive exact formulas for equity and bond prices and approximate expressions for the conditional default probability, recovery rate, and credit spread under the proposed credit risk framework. We propose a novel estimation approach to structural model estimation which accounts for noisy observed asset values. We apply the proposed method to calibrate a simple version of our model to the case of Parmalat and show that the model is able to recover a certain amount of misreporting during the years of accounting irregularities.
Author : David Shimko
Publisher : Risk
ISBN 13 :
Total Pages : 670 pages
Book Rating : 4.E/5 ( download)
Download or read book Credit Risk Models and Management written by David Shimko and published by Risk. This book was released on 2004 with total page 670 pages. Available in PDF, EPUB and Kindle. Book excerpt: Building upon the seminal work established in the first best selling edition, this fully revised multi-author reference collection brings you up-to date with a complete and cohesive examination on the latest techniques for credit risk assessment and management
Author : Robert A. Jarrow
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Structural vs Reduced Form Models written by Robert A. Jarrow and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper compares structural versus reduced form credit risk models from an information based perspective. We show that the difference between these two model types can be characterized in terms of the information assumed known by the modeler. Structural models assume that the modeler has the same information set as the firm's manager - complete knowledge of all the firm's assets and liabilities. In most situations, this knowledge leads to predictable default time. In contracts, reduced form models assume that the modeler has the same information set as the market - incomplete knowledge of the firm's condition. In most cases, the imperfect knowledge leads to an inaccessible default time. As such, we argue that the key distinction between structural and reduced form models is not whether the default is predictable or inaccessible, but whether the information set is observed by the market or not. Consequently, for pricing and hedging, reduced form models are the preferred methodology.
Download or read book Recent Advances in Credit Risk Modeling written by and published by . This book was released on 2009 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: As is well known, most models of credit risk have failed to measure the credit risks in the context of the global financial crisis. In this context, financial industry representatives, regulators and academics worldwide have given new impetus to efforts to improve credit risk modeling for countries, corporations, financial institutions, and financial instruments. The paper summarizes some of the recent advances in this regard. It considers modifications of structural models, including of the classical Merton model, and efforts to reconcile the structural and the reduced-form models. It also discusses the reassessment of the default correlations using copulas, the pricing of credit index options, and the determination of the prices of distressed debt and estimation of recovery values
Author : Gechun Liang
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Download or read book A Modified Structural Model for Credit Risk written by Gechun Liang and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper modifies the classical structural models for credit risk by embedding them into the framework of optimal portfolio problems in an incomplete market. The price of corporate bonds is derived based on the indifference between the investor's two utility maximization problems. Besides the uncertainty of the firm's asset value, we introduce another diffusion process, which comes from the firm's stock value, to drive credit risk. This results in the different behaviors of the credit spread from classical structural models. Two new parameters are introduced into the model, namely the investor's risk aversion parameter and the correlation coefficient between the firm's assets and the stocks it issues, which results in the nonlinearity of the pricing rule. Under the Markovian framework, default occurring at the maturity and default occurring at the first-passage-time are considered, and the corresponding closed formulae are derived by solving the HJB equation Cauchy problem and the HJB equation Dirichlet problem respectively.
Author : Wolfgang Bühler
Publisher :
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.:/5 (129 download)
Download or read book Credit Risk, Liquidity Risk, and Optimal Capital Structure Under Incomplete Accounting Information written by Wolfgang Bühler and published by . This book was released on 2006 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a structural model for credit risk we endogenize inability to pay as a second independent reason for default besides overindebtedness. Inability to pay is triggered by rational behavior of incompletely informed outsiders. The firm needs to raise additional cash via secondary equity offerings in order to service it's coupon payments. Underpricing of secondary equity offerings is explained as necessary for these offerings to be successful. In addition to Duffie/Lando (2001) we find that the liquidity risk has a strong impact on the current firm value and the optimal leverage. Credit spreads of debt in the primary market depend on the degree of liquidity risk. They can be lower or higher than in case without liquidity risk.Our results have a number of additional, interesting consequences. Contrary to Duffie/Lando (2001) incomplete information of outside investors has an impact on the default probability of the firm and therefore on the optimal capital structure which is determined in the primary market. The debt-equity ratio is typically lower than in the Duffie/Lando (2001) model that operates under complete information in the primary market and can result in lower credit spreads.
Author : Christian Bluhm
Publisher : CRC Press
ISBN 13 : 1584889934
Total Pages : 386 pages
Book Rating : 4.5/5 (848 download)
Download or read book Introduction to Credit Risk Modeling written by Christian Bluhm and published by CRC Press. This book was released on 2016-04-19 with total page 386 pages. Available in PDF, EPUB and Kindle. Book excerpt: Contains Nearly 100 Pages of New MaterialThe recent financial crisis has shown that credit risk in particular and finance in general remain important fields for the application of mathematical concepts to real-life situations. While continuing to focus on common mathematical approaches to model credit portfolios, Introduction to Credit Risk Modelin
Author : Nikola A. Tarashev
Publisher :
ISBN 13 :
Total Pages : 56 pages
Book Rating : 4.3/5 ( download)
Download or read book An Empirical Evaluation of Structural Credit Risk Models written by Nikola A. Tarashev and published by . This book was released on 2005 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper evaluates empirically the performance of six structural credit risk models by comparing the probabilities of default (PDs) they deliver to ex post default rates. In contrast to previous studies pursuing similar objectives, the paper employs firm-level data and finds that theory-based PDs tend to match closely the actual level of credit risk and to account for its time path. At the same time, nonmodelled macro variables from the financial and real sides of the economy help to substantially improve the forecasts of default rates. The finding suggests that theory-based PDs fail to fully reflect the dependence of credit risk on the business and credit cycles. Most of the upbeat conclusions regarding the performance of the PDs are due to models with endogenous default. For their part, frameworks that assume exogenous default tend to underpredict credit risk. Three borrower characteristics influence materially the predictions of the models: the leverage ratio; the default recovery rate; and the risk-free rate of return.
Author : Jiawen Gu
Publisher : Open Dissertation Press
ISBN 13 : 9781361345719
Total Pages : pages
Book Rating : 4.3/5 (457 download)
Download or read book On Credit Risk Modeling and Credit Derivatives Pricing written by Jiawen Gu and published by Open Dissertation Press. This book was released on 2017-01-27 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "On Credit Risk Modeling and Credit Derivatives Pricing" by Jiawen, Gu, 古嘉雯, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: In this thesis, efforts are devoted to the stochastic modeling, measurement and evaluation of credit risks, the development of mathematical and statistical tools to estimate and predict these risks, and methods for solving the significant computational problems arising in this context. The reduced-form intensity based credit risk models are studied. A new type of reduced-form intensity-based model is introduced, which can incorporate the impacts of both observable trigger events and economic environment on corporate defaults. The key idea of the model is to augment a Cox process with trigger events. In addition, this thesis focuses on the relationship between structural firm value model and reduced-form intensity based model. A continuous time structural asset value model for the asset value of two correlated firms with a two-dimensional Brownian motion is studied. With the incomplete information introduced, the information set available to the market participants includes the default time of each firm and the periodic asset value reports. The original structural model is first transformed into a reduced-form model. Then the conditional distribution of the default time as well as the asset value of each name are derived. The existence of the intensity processes of default times is proven and explicit form of intensity processes is given in this thesis. Discrete-time Markovian models in credit crisis are considered. Markovian models are proposed to capture the default correlation in a multi-sector economy. The main idea is to describe the infection (defaults) in various sectors by using an epidemic model. Green's model, an epidemic model, is applied to characterize the infectious effect in each sector and dependence structures among various sectors are also proposed. The models are then applied to the computation of Crisis Value-at-Risk (CVaR) and Crisis Expected Shortfall (CES). The relationship between correlated defaults of different industrial sectors and business cycles as well as the impacts of business cycles on modeling and predicting correlated defaults is investigated using the Probabilistic Boolean Network (PBN). The idea is to model the credit default process by a PBN and the network structure can be inferred by using Markov chain theory and real-world data. A reduced-form model for economic and recorded default times is proposed and the probability distributions of these two default times are derived. The numerical study on the difference between these two shows that our proposed model can both capture the features and fit the empirical data. A simple and efficient method, based on the ordered default rate, is derived to compute the ordered default time distributions in both the homogeneous case and the two-group heterogeneous case under the interacting intensity default contagion model. Analytical expressions for the ordered default time distributions with recursive formulas for the coefficients are given, which makes the calculation fast and efficient in finding rates of basket CDSs. DOI: 10.5353/th_b5295509 Subjects: Credit - Management - Mathematical models Credit derivatives - Mathematical models Risk management - Mathematical models
Author : David Lando
Publisher : Princeton University Press
ISBN 13 : 1400829194
Total Pages : 328 pages
Book Rating : 4.4/5 (8 download)
Download or read book Credit Risk Modeling written by David Lando and published by Princeton University Press. This book was released on 2009-12-13 with total page 328 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit risk is today one of the most intensely studied topics in quantitative finance. This book provides an introduction and overview for readers who seek an up-to-date reference to the central problems of the field and to the tools currently used to analyze them. The book is aimed at researchers and students in finance, at quantitative analysts in banks and other financial institutions, and at regulators interested in the modeling aspects of credit risk. David Lando considers the two broad approaches to credit risk analysis: that based on classical option pricing models on the one hand, and on a direct modeling of the default probability of issuers on the other. He offers insights that can be drawn from each approach and demonstrates that the distinction between the two approaches is not at all clear-cut. The book strikes a fruitful balance between quickly presenting the basic ideas of the models and offering enough detail so readers can derive and implement the models themselves. The discussion of the models and their limitations and five technical appendixes help readers expand and generalize the models themselves or to understand existing generalizations. The book emphasizes models for pricing as well as statistical techniques for estimating their parameters. Applications include rating-based modeling, modeling of dependent defaults, swap- and corporate-yield curve dynamics, credit default swaps, and collateralized debt obligations.
Author : Michael Hanke
Publisher : Springer
ISBN 13 : 9783211005200
Total Pages : 212 pages
Book Rating : 4.0/5 (52 download)
Download or read book Credit Risk, Capital Structure, and the Pricing of Equity Options written by Michael Hanke and published by Springer. This book was released on 2003-04-11 with total page 212 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is on option pricing in firm-value-based ("structural”) credit risk models. Using modern techniques (change of numeraire) instead of directly solving partial differential equations (the main approach in the literature), closed-form pricing formulae for options on equity can be derived for a range of well-known models from this class. A common feature of these models is the assumption of an exogenously given firm value process, which leads to an endogenous equity (stock) price process. The stock price process depends directly on the firm’s capital structure. This allows us not only to study credit risk effects in option prices, but also to investigate option price changes resulting from changes in a firm’s capital structure. Numerical results illustrate the implications of our models. Numerous figures and tables allow for an easy comparison of various structural credit risk models.
Author : Tomasz Bielecki
Publisher : John Wiley & Sons
ISBN 13 : 1118003837
Total Pages : 770 pages
Book Rating : 4.1/5 (18 download)
Download or read book Credit Risk Frontiers written by Tomasz Bielecki and published by John Wiley & Sons. This book was released on 2011-02-14 with total page 770 pages. Available in PDF, EPUB and Kindle. Book excerpt: A timely guide to understanding and implementing credit derivatives Credit derivatives are here to stay and will continue to play a role in finance in the future. But what will that role be? What issues and challenges should be addressed? And what lessons can be learned from the credit mess? Credit Risk Frontiers offers answers to these and other questions by presenting the latest research in this field and addressing important issues exposed by the financial crisis. It covers this subject from a real world perspective, tackling issues such as liquidity, poor data, and credit spreads, as well as the latest innovations in portfolio products and hedging and risk management techniques. Provides a coherent presentation of recent advances in the theory and practice of credit derivatives Takes into account the new products and risk requirements of a post financial crisis world Contains information regarding various aspects of the credit derivative market as well as cutting edge research regarding those aspects If you want to gain a better understanding of how credit derivatives can help your trading or investing endeavors, then Credit Risk Frontiers is a book you need to read.
Author : Bernd Schmid
Publisher : Springer Science & Business Media
ISBN 13 : 3540247165
Total Pages : 388 pages
Book Rating : 4.5/5 (42 download)
Download or read book Credit Risk Pricing Models written by Bernd Schmid and published by Springer Science & Business Media. This book was released on 2012-11-07 with total page 388 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit Risk Pricing Models - now in its second edition - gives a deep insight into the latest basic and advanced credit risk modelling techniques covering not only the standard structural, reduced form and hybrid approaches but also showing how these methods can be applied to practice. The text covers a broad range of financial instruments, including all kinds of defaultable fixed and floating rate debt, credit derivatives and collateralised debt obligations.This volume will be a valuable source for the financial community involved in pricing credit linked financial instruments. In addition, the book can be used by students and academics for a comprehensive overview of the most important credit risk modelling issues.
Author : Martin Knoch
Publisher : diplom.de
ISBN 13 : 3832418822
Total Pages : 114 pages
Book Rating : 4.8/5 (324 download)
Download or read book Credit Risk: Recent Advances written by Martin Knoch and published by diplom.de. This book was released on 1999-11-12 with total page 114 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inhaltsangabe:Abstract: We discuss the main approaches to quantify the risk of losses arising from a defaulting counterparty to a financial transaction that have been developed over the last 25 years. Every existing method faces major problems in assessing the numerous and partly non-observable factors influencing credit risk. One shortcoming common to all methods is the classical normal assumption for interest rate changes and asset returns. Therefore we suggest the introduction of stable Paretian models to yield more realistic credit spreads. Inhaltsverzeichnis:Table of Contents: 1.Introduction 2.Basic Properties of Credit Risk Models 2.1Financial Position 2.2Default Probability 2.3The Price Of Credit Risk 3.Structural Models 3.1Structural Models With Constant Interest Rates 3.2Structural Models With Stochastic Interest Rates 4.Reduced Form Models 4.1Terminology of Reduced Form Models 4.1.1Credit Risk and Credit Events 4.1.2Rating Categories and Transition Matrices 4.2Reduced Form Modesl With Default Rates 4.3Reduced Form Models With Rating Transitions 4.3.1Modelling Rating Histories With Markov Chains 4.3.2The Introduction of Pseudo-Probabilities 4.3.3Parameter Estimation 5.Models With Implied Credit Spread 6.Hybrid Models 6.1Rating Transitions 6.2Forward Prices 6.3The Distribution of Values 6.3.1Distributions in Credit Risk and Market Risk Measurement 6.4Expected Loss 6.5Unexpected Loss 6.6Example 7.Rating Categories 7.1Alternative Credit Analysis And Rating Methodology 7.2Example. Standard&Poor s Corporate Rating 7.2.1Rating Categories 7.2.2The Rating Process 7.2.3Credit Analysis Factors 7.3Split Ratings 8.Transition Matrices 8.1Default Probabilities 8.1.1Estimating Default Probabilities 8.1.2Errors Arising From Default Estimation 8.1.3Refining Rating Categories 8.2Properties of Transition Matrices in a Markov Model 8.2.1The Markov Property 8.2.2Monotonicity of Rating Transitions 8.2.3Adjusting Transition Matrices for the Markov Property and Monotonicity 8.3Conditional Rating Migrations 9.Recovery Rates 10.The Term Structure of Credit Spreads 10.1Risk Factors With An Impact On Credit Spreads 10.2Volatility of Credit Spreads 10.2.1The Distribution of Yield Spreads 11.Challenges in Assessing Portfolio Credit Risk 11.1Joint Rating Migrations 11.2Expected and Unexpected Losses of a Portfolio 11.3Estimating Correlations 11.4Monte Carlo Simulation 12Assessing Credit Risk With Stable [...]
