On Infectious Models for Dependent Default Risk
Modeling dependent defaults is a key issue in risk measurement and management. In this paper, we introduce a Markovian infectious model to describe the dependent relationship of default processes of credit entities. The key idea of the proposed model is based on the concept of common shocks adopted in the insurance industry. We compare the proposed model to both one-sector and two-sector models considered in the credit literature using real default data. A log-likelihood ratio test is applied to compare the goodness-of-fit of the proposed model. Our empirical results reveal that the proposed model outperforms both the one-sector and two-sector models.
Markov chains one-sector model two-sector model chain reaction of infectious defaults default risk common shock
Jiawen Gu Wai-Ki Ching Tak-Kuen Siu
Advanced Modeling and Applied Computing Laboratory Department of Mathematics The University of Hong Department of Actuarial Studies and Center for Financial Risk Faculty of Business and Economics Macq
国际会议
昆明、丽江
英文
1196-1200
2011-04-15（万方平台首次上网日期，不代表论文的发表时间）