Correlated defaults, temporal correlation, expert information and predictability of default rates
نویسندگان
چکیده
منابع مشابه
Correlated Defaults, Temporal Correlation, Expert Information and Predictability of Default Rates
Dependence among defaults both across assets and over time has proven to be an important characteristic of financial risk. A Bayesian approach to default rate estimation is proposed and illustrated using a prior distributions assessed from an experienced industry expert. Two extensions of the binomial model, most common in applications, are proposed. The first allows correlated defaults yet rem...
متن کاملDefault Estimation, Correlated Defaults, and Expert Information
Capital allocation decisions are made on the basis of an assessment of creditworthiness. Default is a rare event for most segments of a bank’s portfolio and data information can be minimal. Inference about default rates is essential for efficient capital allocation, for risk management and for compliance with the requirements of the Basel II rules on capital standards for banks. Expert informat...
متن کاملDefault Estimation and Expert Information
Default is a rare event, even in segments in the midrange of a bank’s portfolio. Inference about default rates is essential for risk management and for compliance with the requirements of Basel II. Most commercial loans are in the middle-risk categories and are to unrated companies. Expert information is crucial in inference about defaults. A Bayesian approach is proposed and illustrated using ...
متن کاملTemporal Correlation of Defaults in Subprime Securitization
The securitization of subprime mortgages in instruments like mortgage-backed securities and collateralized debt obligations is one of the key ingredients to the current financial crisis. During 2007 and 2008, subprime defaults increased sharply, displaying high serial correlation in their arrival. Subprime default events depend on house price changes. We establish a link between the dynamics of...
متن کاملCorrelated default with incomplete information
The recent accounting scandals at Enron, WorldCom, and Tyco were related to the misrepresentation of liabilities. We provide a structural model of correlated multi-firm default, in which public bond investors are uncertain about the liability-dependent barrier at which individual firms default. Investors form prior beliefs on the barriers, which they update with the default status information o...
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ژورنال
عنوان ژورنال: Econometric Reviews
سال: 2017
ISSN: 0747-4938,1532-4168
DOI: 10.1080/07474938.2017.1307547