In this paper we introduce a sublinear conditional operator with respect to family of possibly nondominated probability measures in presence multiple ordered default times. way generalize the results Biagini and Zhang (2019), where reduced-form framework under model uncertainty for single time is developed. Moreover, use valuation credit portfolio derivatives uncertainty.

Hedesström, T. M. (2006). The psychology of diversification: Novice investors’ ability to spread risks. Department of Psychology, Göteborg University, Sweden In order to reduce risk, portfolio theory prescribes holding a stock portfolio that is diversified across industries and countries. This thesis investigates novice investors’ ability to compile well-diversified portfolios and to what exten...

We propose a portfolio credit risk model with dependent loss given default (LGD) which allows for a reasonable economic interpretation and can easily be applied to real data. We build up a precise mathematical framework and stress some general important issues when modeling dependent LGD. Finally, we calibrate the model based on American bond data from 1982 to 2001 and compare the results with ...

We analyze the consequences of portfolio compression for systemic risk. Portfolio is a post-trade netting mechanism that reduces gross positions while keeping net unchanged and it part financial legislation in United States (Dodd–Frank Act) Europe (European Market Infrastructure Regulation). derive necessary structural conditions to be harmful discuss policy implications. show any potential har...

In Crépey (2015, Part II), a basic reduced-form counterparty risk modeling approach was introduced, under a rather standard immersion hypothesis between a reference filtration and the filtration progressively enlarged by the default times of the two parties, also involving the continuity of some of the data at default time. This basic approach is too restrictive for application to credit deriva...

We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market coefficients are assumed to depend on the market regime in place, which is modeled by a finite state continuous time Markov process. By separating the utility m...

Cloud computing emerges as a powerful driver of the information technology industry and many companies are willing to exploit the advantages this development bears. However, services provided by the cloud are subject to default which can result in major economic damage for the client. Moreover, different cloud service providers may also bear a conjoint risk and may therefore not default indepen...

Article history: Received 12 July 2010 Received in revised form 5 May 2011 Accepted 12 May 2011 Available online 18 May 2011 Traditional credit risk models adopt the linear correlation as a measure of dependence and assume that credit losses are normally-distributed. However some studies have shown that credit losses are seldom normal and the linear correlation does not give accurate assessment...

Ambivalence in the regulatory definition of capital adequacy for credit risk has recently steered the financial services industry to collateral loan obligations (CLOs) as an important balance sheet management tool. CLOs represent a specialised form of Asset-Backed Securitisation (ABS), with investors acquiring a structured claim on the interest proceeds generated from a portfolio of bank loans ...

We present the SPA framework, a novel approach to the modeling of the dynamics of portfolio default losses. In this framework, models are specified by a twolayer process. The first layer models the dynamics of portfolio loss distributions in the absence of information about default times. This background process can be explicitly calibrated to the full grid of marginal loss distributions as imp...