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Sharp probability tail estimates for portfolio credit risk

Collamore, Jeffrey F.; Silva, Hasitha de; Vidyashankar, … - In: Risks : open access journal 10 (2022) 12, pp. 1-20

Portfolio credit risk is often concerned with the tail distribution of the total loss, defined to be the sum of default losses incurred from a collection of individual loans made out to the obligors. The default for an individual loan occurs when the assets of a company (or individual) fall...

Persistent link: https://www.econbiz.de/10014230963

Importance sampling in the presence of PD-LGD correlation

Metzler, Adam; Scott, Alexandre - In: Risks : open access journal 8 (2020) 1/25, pp. 1-36

This paper seeks to identify computationally efficient importance sampling (IS) algorithms for estimating large deviation probabilities for the loss on a portfolio of loans. Related literature typically assumes that realised losses on defaulted loans can be predicted with certainty, i.e., that...

Persistent link: https://www.econbiz.de/10012203783

Persistence of bank credit default swap spreads

Huang, Xin - In: Risks : open access journal 7 (2019) 3/90, pp. 1-13

Credit default swap (CDS) spreads measure the default risk of the reference entity and have been frequently used in …

Persistent link: https://www.econbiz.de/10012126480

Effect of variance swap in hedging volatility risk

Shen, Yang - In: Risks : open access journal 8 (2020) 3/70, pp. 1-34

This paper studies the effect of variance swap in hedging volatility risk under the mean-variance criterion. We … financial market is complete and contains three primitive assets: a bank account, a stock and a variance swap, where the … variance swap can be used to hedge against the volatility risk. In the second problem, only the bank account and the stock can …

Persistent link: https://www.econbiz.de/10012293125

Uncertainty in pricing and risk measurement of survivor contracts

So, Kenrick Raymond; Cruz, Stephanie Claire; Marcella, … - In: Risks : open access journal 13 (2025) 2, pp. 1-25

As life expectancy increases, pension plans face growing longevity risk. Standardized longevity-linked securities such as survivor contracts allow pension plans to transfer this risk to capital markets. However, more consensus is needed on the appropriate mortality model and premium principle to...

Persistent link: https://www.econbiz.de/10015334597

Climate-related default probabilities

Blanc-Blocquel, Augusto; Ortiz-Gracia, Luis; Sanfelici, … - In: Risks : open access journal 12 (2024) 11, pp. 1-19

Climate risk refers to the risks associated with climate change and has already started to impact various sectors of the economy. In this work, we focus on the impact of physical risk on the probability of default for a firm in the agribusiness sector. The probability of default is estimated...

Persistent link: https://www.econbiz.de/10015137901

Spectral expansions for credit risk modelling with occupation times

Campolieti, Giuseppe; Kato, Hiromichi; Makarov, Roman - In: Risks : open access journal 10 (2022) 12, pp. 1-20

defaults and credit default swap (CDS) spreads as special cases, which are derived analytically via a spectral expansion …

Persistent link: https://www.econbiz.de/10014230904

An urn-based nonparametric modeling of the dependence between PD and LGD with an application to mortgages

Cheng, Dan; Cirillo, Pasquale - In: Risks : open access journal 7 (2019) 3, pp. 76

We propose an alternative approach to the modeling of the positive dependence between the probability of default and the loss given default in a portfolio of exposures, using a bivariate urn process. The model combines the power of Bayesian nonparametrics and statistical learning, allowing for...

Persistent link: https://www.econbiz.de/10012127587

Aggregation of incidence and intensity risk variables to achieve reconciliation

Hunt, Clive; Taplin, Ross - In: Risks : open access journal 7 (2019) 4/107, pp. 1-14

The aggregation of individual risks into total risk using a weighting variable multiplied by two ratio variables representing incidence and intensity is an important task for risk professionals. For example, expected loss (EL) of a loan is the product of exposure at default (EAD), probability of...

Persistent link: https://www.econbiz.de/10012127917

Multivariate collective risk model : dependent claim numbers and Panjer's recursion

Rudolph, Cordelia; Schmock, Uwe - In: Risks : open access journal 8 (2020) 2/43, pp. 1-31

In this paper, we discuss a generalization of the collective risk model and of Panjer's recursion. The model we consider consists of several business lines with dependent claim numbers. The distributions of the claim numbers are assumed to be Poisson mixture distributions. We let the claim...

Persistent link: https://www.econbiz.de/10012292820