Stress testing has become a crucial point on the Basel II agenda, mainly as Pillar I estimatesdo not explicitly take portfolio concentration into account. We start from the credit portfolioof the German pension insurer being a cross-sectional representation of the German economyand subsequently...

Rating downgrades are known to make subsequent downgrades more likely. We analyze theimpact of this ‘downward momentum’ on credit portfolio risk. Using S&P ratings from 1996to 2005, we estimate a transition matrix that is insensitive to and a second matrix that is sensitiveto previous...

A model for the credit risk of a portfolio of market driven financial contracts (for example swaps) is introduced.(...)

This paper solves the intertemporal investment problem of an investor holding a portfolio of default-free and defaultable bonds.

This paper presents a utility-based approach to value the borrower optimal behavior in presence of credit risk. The paper solves for the dynamic portfolio choices of a borrower. We thereby show that the presence of debt leads to a substantial modification in the borrower's behavior across states...

Normal distribution of the residuals is the traditional assumption in the classicalmultivariate time series models. Nevertheless it is not very often consistent with the real data.Copulae allows for an extension of the classical time series models to nonelliptically distributedresiduals. In this...

In this note we give a lnultivariate extension of the proof of Ospina &Gerber (1987) of the result of Feller (1968) that a univariate distribution on the non-negative integers...

We propose a new nonlinear classification method based on a Bayesian "sum-of-trees" model, the Bayesian Additive Classification Tree (BACT), whichextends the Bayesian Additive Regression Tree (BART) method into the classification context. Like BART, the BACT is a Bayesian nonparametric...

Modeling the portfolio credit risk is one of the crucial issues of the last yearsin the financial problems. We propose the valuation model of Collateralized DebtObligations based on a one- and two-parameter copula and default intensities estimatedfrom market data. The presented method is used to...