Recent literature has pointed out that information asymmetries may be the reason for the poor performance of structural credit risk models to fit corporate bond data. It is well known in fact that these models lead to a strong understatement of the credit spread terms structure, particularly on...

Recent literature has pointed out that information asymmetries may be the reason for the poor performance of structural credit risk models to fit corporate bond data. It is well known in fact that these models lead to a strong understatement of the credit spread terms structure, particularly on...

In this paper we suggest a new technique to construct Markov processes by means of products of copula functions, in the spirit of Darsow et al, (1992). The approach requires to define: i) a sequence of distribution functions of the increments of the process; ii) a sequence of copula functions...

Structural models produce credit spreads which are too low relative to those observed in the market. This problem is particularly relevant for: i) short maturities; ii) firms with low leverage and volatility. Duffie and Lando (2001) suggested that allowing for accounting noise could solve issue...

Redenomination and default risk are key issues for European sovereign bond markets. Which of the two credit events is more likely? And which is expected to occur first? For Italy, France, Germany and Netherlands we find that redenomination abruptly rises above default risk since February 2017,...

Singular distributions, such as the Marshall-Olkin one, assign a probability mass to the simultaneous occurrence of events. Aim of this paper is to: i) provide systemic risk measures based on singular distributions; ii) evaluate the presence of a singular component in the joint default...

The EU Capital Requirement Regulation (CRR) and the EBA Regulatory Technical Standard for prudent valuation, published on Jan. 1st, 2014 and Jan. 28th, 2016, respectively, constitute the EU Prudent Valuation Framework, which represents a challenge for financial institutions both from a...

We propose a new index for measuring the systemic risk of default of the banking sector, which is based on a homogeneous version of multivariate intensity based models (Cuadras – Augé distribution). We compute the index for 10 European countries, exploiting the information incorporated in the...

We propose a model and an estimation technique to distinguish systemic risk and contagion in credit risk. The main idea is to assume, for a set of $d$ obligors, a set of $d$ idiosyncratic shocks and a shock that triggers the default of all them. All shocks are assumed to be linked by a...

We apply copula functions to evaluate counterpart risk in swap transactions. Using copulas allows to generalise the approach proposed by Sorensen and Bollier (1994), allowing for dependence between swap rates and counterparty default. Counterpart risk is represented by a sequence of vulnerable...