The papers in this special issue of Mathematics and Computers in Simulation cover the following topics: improving judgmental adjustment of model-based forecasts, whether forecast updates are progressive, on a constrained mixture vector autoregressive model, whether all estimators are born equal:...

Non-performing loans (NPLs) rate is one of the main risks in commercial banks and is also a critical measure of the bank's financial performance and stability. Banks meet the growth rate of NPLs when the debtors are not able to meet their financial obligations in terms of repayment of loans....

This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American style options in most cases, which require a backward...

We propose a joint dating of the Italian business and credit cycle on a historical horizon, by applying a local turning-point dating algorithm to the level of the variables. Along with short cycles, corresponding to traditional business cycle fluctuations, we also investigate medium cycles,...

Diffusion in a linear potential in the presence of position-dependent killing is used to mimic a default process. Different assumptions regarding transport coefficients, initial conditions, and elasticity of the killing measure lead to diverse models of bankruptcy. One “stylized fact” is...

Using state-of-the-art recurrent neural network architectures, this study attempts to predict credit default swap risk premia for BR[I]CS countries as accurately as possible. In the time series setting, these recurrent neural networks are ELMAN, NARX, GRU, and LSTM RNNs, considering local and...

This paper proposes a tractable way to incorporate lending standards ("credit qualification thresholds") into macro models of financial frictions. Banks can reject borrowers whose risk is above an endogenous threshold at which no lending rate sufficiently compensates banks for the borrowers'...

This paper reviews the quantitative methods used at selected central banks to stress testing credit risk, focusing in particular on the methods used to link macroeconomic drivers of stress with bank specific measures of credit risk (macro stress test). Stress testing credit risk is an essential...