A multivariate data set, which exhibit complex patterns of dependence, particularly in the tails, can be modelled using a cascade of lower-dimensional copulae. In this paper, we compare two such models that differ in their representation of the dependency structure, namely the nested Archimedean...

Abstract In this paper, we study a credit risk (collateral) management scheme for the Canadian retail payment system designed to cover the exposure of a defaulting member. We estimate ex ante the size of a collateral pool large enough to cover exposure for a historical worst-case default...

Summary The forward rate curve is assumed to follow a stochastic differential equation w.r.t. a Lévy process with infinite dimensions. Conditions under which the market is free of arbitrage are provided for both the interest rate case and for the case of credit risk with ratings. A simulation...

Abstract We design a discrete time arbitrage-free model under incomplete information for application to credit risk models in the spirit of Duffie and Lando (2001). We assume a fundamental value process evolving according to a complete market model and a sequence of imperfect signals conveying...

This work undertakes the first comprehensive theoretical assessment of syndicated loans. It is shown that syndicated and bilateral (single lender) loans should be good substitutes in meeting a borrower's financing requirements, but that syndicated loans are more complex and impose additional...

The objective of this paper is to determine how relative market and credit risk changes among European sectors during times of extreme market fluctuations. Ten sectors comprising the S&P Euro index are compared prior to and during the Global Financial Crisis (GFC). Market risk is measured using...

Accurate business failure prediction models would be extremely valuable to many industry sectors, particularly financial investment and lending. The potential value of such models is emphasised by the extremely costly failure of high-profile companies in the recent past. Consequently, a...

This paper presents fresh findings about key determinants of credit risk of commercial banks in emerging economy banking systems compared with developed economies. Australia, France, Japan and the US represent developed economies; emerging economies are India, Korea, Malaysia, Mexico and...

The study measures farm credit risk by using farm records collected by Farm Business Farm Management (FBFM) during the period 1995-2004. The study addresses the following questions: 1) whether farm’s financial position is fully described by the structure model, 2) what are the determinants of...

Existing literature has focused attention on the impact of Basle I and similar capital requirement regulations on developed countries where such regulations were found to be effective in increasing capital ratios and reducing portfolio credit risk of commercial banks. In the present study, we...