Showing 1 - 10 of 17
In this study, we examine whether changes in the investment opportunityset stemming from interest rate and credit risks are priced in the US, theUK and the Swiss equity premia by estimating both two-factor and three-factor versions of Merton’s ICAPM. The systematic pricing of credit riskis...
Persistent link: https://www.econbiz.de/10005857973
This paper examines latent risk factors in models for migration risk. We employ thestandard statistical framework for ordered categorical variables and induce dependencebetween migrations by means of latent risk factors. By assuming a Markov process forthe dynamics of the latent factors, the...
Persistent link: https://www.econbiz.de/10005857974
Sustainable debt has become a key issue in rating of private as well as sovereign debtors. The problem of how to estimate sustainable debt has also been at the center of debate over theAsian 1997-1998 financial crisis. If the external value of the currency depends on the external debt of a...
Persistent link: https://www.econbiz.de/10005858002
In June 2003 Swiss banks held over CHF 500 billion in mortgages. This important segment accounts for about 63% of all loan portfolios of Swiss banks. Since default insurance is not common in Switzerland, the corresponding risks are a severe threat for the health of the financial system. We...
Persistent link: https://www.econbiz.de/10005858102
In single-obligor default risk modelling, using a background filtration in conjunction with a suitable embedding hypothesis (generally known as H-hypothesis or immersion property) has proven a very successful tool to separate the actual default event from the model for the default arrival...
Persistent link: https://www.econbiz.de/10005858244
This paper develops a default-risky bond pricing model, which assumes that the default intensity is driven by a Markov chain and which accounts for default and liquidity risk. A representation of the bond price dynamics, which separates three different types of risk, was obtained. Introducing...
Persistent link: https://www.econbiz.de/10005858310
We propose a simple and implementable model of credit contagion where we in-clude macro- and microstructural dependencies among the debtors within a creditportfolio. We show that, even for diversified portfolios, moderate microstructuraldependencies have already a significant impact on the tails...
Persistent link: https://www.econbiz.de/10005858362
This paper studies in some examples the role of information in a default-risk framework. In a first-passage model, we assume that investors obtain two types of information about the firm’s unlevered asset value at a discrete sequence of dates. The effects of information on the distributional...
Persistent link: https://www.econbiz.de/10005858364
The aim of this paper is to explain why cross-sectional estimated migration correlations displayed in the academic and professional literature can be either not consistent, or inefficient, and to discuss alternative approaches. The analysis relies on a model with stochastic migration in which...
Persistent link: https://www.econbiz.de/10005858516
In this paper we explain how to use rating histories provided by the internal scoring systems of banks and by rating agencies in order to predict the future risk of a set of borrowers. The method is developed following the steps suggested by the Basle Committee. To introduce both migration...
Persistent link: https://www.econbiz.de/10005858518