The dynamic analysis of corporate credit ratings is needed for predicting the risk included in a credit portfolio at different horizons. In this paper, we present the estimation of an ordered probit model with factors for the migration probabilities, with its application to aggregate data...

This paper introduces impulse response analysis for nonlinear processes based on the concept of nonlinear innovation. Our approach borrows from the traditional linear impulse response analysis in that we consider shocks to innovations of a process. It also extends the methods of nonlinear...

We derive a coherent multi-factor model for pricing various derivatives written on the same underlying (potentially non-tradable) asset. We show the difference between a case in which the underlying asset is self-financed and tradable and a case in which it is not. In the first case, an...

Subordinated stochastic processes, also called time deformed stochastic processes, have been proposed in a variety of contexts to describe asset price behavior. They are used when the movement of prices is tied to the number of market transactions, trading volume or the more elusive concept of...

This paper introduces nonlinear dynamic factor models for various applications related to risk analysis. Traditional factor models represent the dynamics of processes driven by movements of latent variables, called the factors. Our approach extends this setup by introducing factors defined as...