A Hierarchical Archimedean Copula For Portfolio Credit Risk Modelling

Author : Natalia Puzanova
Publisher :
ISBN 13 :
Total Pages : 40 pages
Book Rating : 4.16/5 ( download)

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Download or read book A Hierarchical Archimedean Copula for Portfolio Credit Risk Modelling written by Natalia Puzanova and published by . This book was released on 2016 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: I introduce a novel, hierarchical model of tail dependent asset returns which can be particularly useful for measuring portfolio credit risk within the structural framework. To allow for a stronger dependence within sub-portfolios than between them, I utilise the concept of nested Archimedean copulas, but modify the nesting procedure to ensure the compatibility of copula generators by construction. This makes sampling straightforward. Moreover, I provide details on a particular specification based on a gamma mixture of powers. This model allows for lower tail dependence, resulting in a more conservative credit risk assessment than a comparable Gaussian model. I illustrate the extent of model risk when calculating VaR or Expected Shortfall for a credit portfolio.

Author : Natalia Tente
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.79/5 ( download)

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Download or read book A Hierarchical Archimedean Copula for Portfolio Credit Risk Modelling written by Natalia Tente and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: I introduce a novel, hierarchical model of tail dependent asset returns which can be particularly useful for measuring portfolio credit risk within the structural framework. To allow for a stronger dependence within sub-portfolios than between them, I utilise the concept of nested Archimedean copulas, but modify the nesting procedure to ensure the compatibility of copula generators by construction. This makes sampling straightforward. Moreover, I provide details on a particular specification based on a gamma mixture of powers. This model allows for lower tail dependence, resulting in a more conservative credit risk assessment than a comparable Gaussian model. I illustrate the extent of model risk when calculating VaR or Expected Shortfall for a credit portfolio.

Author : Natalia Puzanova
Publisher :
ISBN 13 :
Total Pages : 56 pages
Book Rating : 4.03/5 ( download)

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Download or read book A Hierarchical Model of Tail Dependent Asset Returns for Assessing Portfolio Credit Risk written by Natalia Puzanova and published by . This book was released on 2016 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper introduces a multivariate pure-jump Lévy process which allows for skewness and excess kurtosis of single asset returns and for asymptotic tail dependence in the multivariate setting. It is termed Variance Compound Gamma (VCG). The novelty of my approach is that, by applying a two-stage stochastic time change to Brownian motions, I derive a hierarchical structure with different properties of inter- and intra-sector dependence. I investigate the properties of the implied static copula families and come to the conclusion that they are ordered with respect to their parameters and that the lower-tail dependence of the intra-sector copula is increasing in the absolute values of skewness parameters. Furthermore, I show that the joint characteristic function of the VCG asset returns can be explicitly given as a nested Archimedean copula of their marginal characteristic functions. Applied to credit portfolio modelling, the framework introduced results in a more conservative tail risk assessment than a Gaussian framework with the same linear correlation structure, as I show in a simulation study. To foster the simulation efficiency, I provide an Importance Sampling algorithm for the VCG portfolio setting.

Author : Jan Górecki
Publisher : Springer Nature
ISBN 13 : 3031563379
Total Pages : 128 pages
Book Rating : 4.79/5 ( download)

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Download or read book Hierarchical Archimedean Copulas written by Jan Górecki and published by Springer Nature. This book was released on with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Author : Christian Bluhm
Publisher : CRC Press
ISBN 13 : 1584889934
Total Pages : 386 pages
Book Rating : 4.39/5 ( download)

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Download or read book Introduction to Credit Risk Modeling written by Christian Bluhm and published by CRC Press. This book was released on 2016-04-19 with total page 386 pages. Available in PDF, EPUB and Kindle. Book excerpt: Contains Nearly 100 Pages of New MaterialThe recent financial crisis has shown that credit risk in particular and finance in general remain important fields for the application of mathematical concepts to real-life situations. While continuing to focus on common mathematical approaches to model credit portfolios, Introduction to Credit Risk Modelin

Author : Arkady Shemyakin
Publisher : John Wiley & Sons
ISBN 13 : 1118959035
Total Pages : 352 pages
Book Rating : 4.39/5 ( download)

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Download or read book Introduction to Bayesian Estimation and Copula Models of Dependence written by Arkady Shemyakin and published by John Wiley & Sons. This book was released on 2017-02-24 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: Presents an introduction to Bayesian statistics, presents an emphasis on Bayesian methods (prior and posterior), Bayes estimation, prediction, MCMC,Bayesian regression, and Bayesian analysis of statistical modelsof dependence, and features a focus on copulas for risk management Introduction to Bayesian Estimation and Copula Models of Dependence emphasizes the applications of Bayesian analysis to copula modeling and equips readers with the tools needed to implement the procedures of Bayesian estimation in copula models of dependence. This book is structured in two parts: the first four chapters serve as a general introduction to Bayesian statistics with a clear emphasis on parametric estimation and the following four chapters stress statistical models of dependence with a focus of copulas. A review of the main concepts is discussed along with the basics of Bayesian statistics including prior information and experimental data, prior and posterior distributions, with an emphasis on Bayesian parametric estimation. The basic mathematical background of both Markov chains and Monte Carlo integration and simulation is also provided. The authors discuss statistical models of dependence with a focus on copulas and present a brief survey of pre-copula dependence models. The main definitions and notations of copula models are summarized followed by discussions of real-world cases that address particular risk management problems. In addition, this book includes: • Practical examples of copulas in use including within the Basel Accord II documents that regulate the world banking system as well as examples of Bayesian methods within current FDA recommendations • Step-by-step procedures of multivariate data analysis and copula modeling, allowing readers to gain insight for their own applied research and studies • Separate reference lists within each chapter and end-of-the-chapter exercises within Chapters 2 through 8 • A companion website containing appendices: data files and demo files in Microsoft® Office Excel®, basic code in R, and selected exercise solutions Introduction to Bayesian Estimation and Copula Models of Dependence is a reference and resource for statisticians who need to learn formal Bayesian analysis as well as professionals within analytical and risk management departments of banks and insurance companies who are involved in quantitative analysis and forecasting. This book can also be used as a textbook for upper-undergraduate and graduate-level courses in Bayesian statistics and analysis. ARKADY SHEMYAKIN, PhD, is Professor in the Department of Mathematics and Director of the Statistics Program at the University of St. Thomas. A member of the American Statistical Association and the International Society for Bayesian Analysis, Dr. Shemyakin's research interests include informationtheory, Bayesian methods of parametric estimation, and copula models in actuarial mathematics, finance, and engineering. ALEXANDER KNIAZEV, PhD, is Associate Professor and Head of the Department of Mathematics at Astrakhan State University in Russia. Dr. Kniazev's research interests include representation theory of Lie algebras and finite groups, mathematical statistics, econometrics, and financial mathematics.

Author : Thomas B. Fomby
Publisher : Emerald Group Publishing
ISBN 13 : 1848551975
Total Pages : 304 pages
Book Rating : 4.78/5 ( download)

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Download or read book Econometrics and Risk Management written by Thomas B. Fomby and published by Emerald Group Publishing. This book was released on 2008-12-01 with total page 304 pages. Available in PDF, EPUB and Kindle. Book excerpt: Covers credit risk and credit derivatives. This book offers several points of view on credit risk when looked at from the perspective of Econometrics and Financial Mathematics. It addresses the challenge of modeling defaults and their correlations, and results on copula, reduced form and structural models, and the top-down approach.

Author : Eva Lütkebohmert
Publisher : Springer Science & Business Media
ISBN 13 : 3540708707
Total Pages : 229 pages
Book Rating : 4.04/5 ( download)

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Download or read book Concentration Risk in Credit Portfolios written by Eva Lütkebohmert and published by Springer Science & Business Media. This book was released on 2008-09-30 with total page 229 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modeling and management of credit risk are the main topics within banks and other lending institutions. Historical experience shows that, in particular, concentration of risk in credit portfolios has been one of the major causes of bank distress. Therefore, concentration risk is highly relevant to anyone who wants to go beyond the very basic portfolio credit risk models. The book gives an introduction to credit risk modeling with the aim to measure concentration risks in credit portfolios. Taking the basic principles of credit risk in general as a starting point, several industry models are studied. These allow banks to compute a probability distribution of credit losses at the portfolio level. Besides these industry models the Internal Ratings Based model, on which Basel II is based, is treated. On the basis of these models various methods for the quantification of name and sector concentration risk and the treatment of default contagion are discussed. The book reflects current research in these areas from both an academic and a supervisory perspective

Author : Christian Bluhm
Publisher : CRC Press
ISBN 13 : 1420011472
Total Pages : 376 pages
Book Rating : 4.70/5 ( download)

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Download or read book Structured Credit Portfolio Analysis, Baskets and CDOs written by Christian Bluhm and published by CRC Press. This book was released on 2006-09-29 with total page 376 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial industry is swamped by credit products whose economic performance is linked to the performance of some underlying portfolio of credit-risky instruments, like loans, bonds, swaps, or asset-backed securities. Financial institutions continuously use these products for tailor-made long and short positions in credit risks. Based on a stead

Author : Michal Rychnovsky
Publisher : LAP Lambert Academic Publishing
ISBN 13 : 9783845441375
Total Pages : 76 pages
Book Rating : 4.72/5 ( download)

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Download or read book Portfolio Credit Risk Models written by Michal Rychnovsky and published by LAP Lambert Academic Publishing. This book was released on 2012 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Long before the Global Financial Crisis in the late-2000s, many academics and professionals were discussing the adequacy of using so called Gaussian copula models to evaluate the risk of collateralized debt obligations (CDOs). Many of them pointed out that such models are too simplifying the complicated correlation structure of portfolios. Indeed, this was afterwards identified as one of the key factors spreading the crisis. In this book, we would like to introduce the basic mathematical theory of the copula-based portfolio credit risk models and some of their generalizations. We start by introducing the terms of probability of default and expected loss, as well as some common obligor models. Then we give an example of a duo basket model, followed by mathematical definitions of copulas and various dependence measures. Finally, we focus on threshold models and their limit behavior for the number of loans going to infinity. This book is written in a scientifically rigorous but still easy-to-read style providing many new insights into this topic.