We revisit a test for conditional independence proposed by Das, Duffie, Kapadia, Saita (2007) (DDKS) applied to US corporate defaults. They reject the conditional independence assumption but also observe that the test is a joint test of the specification of the default intensity of individual...

In this article, we apply the multivariate Generalized Hyperbolic (mGH) distribution to portfolio modelling, using Conditional Value at Risk as a risk measure. Exploiting the fact that portfolios whose constituents follow an mGH distribution are univariate GH distributed, we prove some results...

Lenders use rating and scoring models to rank credit applicants on their expected performance. The models and approaches are numerous. We explore the possibility that estimates generated by models developed with data drawn solely from extended loans are less valuable than they should be because...

The measurement of credit quality is at the heart of the models designed to assess the reserves and capital needed to support the risks of both individual credits and portfolios of credit instruments. A popular specificatio for credit-rating transitions is the simple, time-homogeneous Markov...

The purpose of this study is to explore empirically the link between corporate diversification and magnitude of risk through the channel of Cash Flow-at-Risk models (C-FaR). The Cash-Flow-at-Risk models (C-FaR) where constructs tailored cash flows distributions for diversified firms for a...

This paper examines the empirical properties of hedge fund returns and proposes a fully parametric model capable of adequately describing both univariate and multivariate return properties. The suggested model is based on the multivariate extension of the Normal Inverse Gaussian (NIG)...

Accurate credit-granting decisions are crucial to the efficiency of the decentralized capital allocation mechanisms in modern market economies. Credit bureaus and many financial institutions have developed and used credit-scoring models to standardize and automate, to the extent possible, credit...