A structural credit risk model with default contagion
| Authors | |
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| Publication date | 2024 |
| Host editors |
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| Book title | Mathematical and Statistical Methods for Actuarial Sciences and Finance |
| Book subtitle | MAF2024 |
| ISBN |
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| ISBN (electronic) |
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| Event | 11th International Conference Mathematical and Statistical Methods for Actuarial Sciences and Finance |
| Pages (from-to) | 280-285 |
| Number of pages | 6 |
| Publisher | Cham: Springer |
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| Abstract | Structural threshold models are common industry practice for modelling portfolio credit risk, but often only consider default dependence via underlying common factors. We consider a structural model extension that allows for additionally incorporating default contagion effects. A simulation study illustrates that ignoring default contagion effects may lead to significant underestimation of portfolio tail risk. As a key contribution, we propose a procedure for estimating default contagion parameters from historical default probability data. |
| Document type | Conference contribution |
| Language | English |
| Published at | https://doi.org/10.1007/978-3-031-64273-9_46 https://doi.org/10.1007/978-3-031-64273-9_46 |
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A Structural Credit Risk Model with Default Contagion
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