Proprietary and academic models of credit risk measurement are surveyed and compared. Emphasis is on the special challenges associated with estimating the credit risk exposure of middle market firms. A sample database of middle market obligations is used to contrast estimates across different model specifications.

Risk is inherent in distributed, large-scale systems. This paper explores the challenges of risk modeling in such systems, and suggests a risk modeling approach that is responsive to the requirements of complex, distributed, large-scale systems. An example of the use of the approach in the marine transportation system is given. The paper concludes with a discussion of limitations of the approac...

The literature on credit risk consists of different approaches in modeling the behavior of defaultable bonds. The structural approach is based on the evolution of the firm value to determine default and recovery. In contrast, the more recently developed intensity-based models specify the default time exogenously. In this approach the defaultable yield curve results from the risk-free yield curv...

For the renewal risk model with subexponential claim sizes, we established for the finite time ruin probability a lower asymptotic estimate as initial surplus increases, subject to the demand that it should hold uniformly over all time horizons in an infinite interval. In the case of Poisson model, we also obtained the upper asymptotic formula so that an equivalent formula was derived. These ex...

This paper distinguishes relative risk aversion and resistance to intertemporal substitution in climate risk modeling. Stochastic recursive preferences are introduced in a stylized numeric climate-economy model using preliminary IPCC 1998 scenarios. It shows that higher risk aversion increases the optimal carbon tax. Higher resistance to intertemporal substitution alone has the same effect as i...

If Bitcoin becomes the prevalent payment system on the Internet, crime fighters will join forces with regulators and enforce blacklisting of transaction prefixes at the parties who offer real products and services in exchange for bitcoin. Blacklisted bitcoins will be hard to spend and therefore less liquid and less valuable. This requires every recipient of Bitcoin payments not only to check al...

Merton Model is one of the famous credit risk models. This model presumes that the only source of uncertainty in equity prices is the firm’s net asset value .But the above market condition holds only when the market is efficient which is often been ignored in modern research. Another, the original Merton Model is based on assumptions that in the event of default absolute priority holds, renegot...

1 This is the written version of the Cattedra Galileana lectures, Scuola Normale Supe-riore, in Pisa, 2002, made possible through the wonderful organizational work of Maurizio Pratelli, to whom I am most grateful. I am also grateful for support for the course offered by the Associazione Amici della Scuola Normale Superiore, who were generously represented by Mr. Carlo Gulminelli.

This paper estimates a consumption-based, no-arbitrage model of the term structure of real interest rates. The model nests the standard long-run risk model which assumes constant market prices of risk. We find that the long-run consumption risk dominates the short-run and volatility risks and drives most of the movements of bond risk premiums. The risk premium for consumption volatility is nega...

This paper is concerned with the stochastic comparison of two individual risk models for homogeneous portfolios with different claim size distributions. It is shown that a Lorenz order between the claim sizes, or a hamr-order if the claim sizes are NBUE, are transferred to the corresponding individual risk models. © 2001 Elsevier Science B.V. All rights reserved.