Original title: Multifactor dynamic credit risk model
Authors: Dufek, J. ; Šmíd, Martin
Document type: Papers
Conference/Event: MME 2014. International Conference Mathematical Methods in Economics /32./, Olomouc (CZ), 2014-09-10 / 2014-09-12
Year: 2014
Language: eng
Abstract: We propose a new dynamic model of the Merton type, based on the Vasicek model. We generalize Vasicek model in three ways: we add model for loss given default (LGD), we add dynamics to the model and we allow non-normal distri- butions of risk factors. Then we add a retrospective interaction of underlying factors and found a non-linear behaviour of these factors. In particular, the evolution of factors underlying the DR and the LGD is assumed to be ruled by a non-linear vector AR process with lagged DR and LGD and their non-linear transformations. We apply our new model on real US mortgage data and demonstrate its statistical significance.
Keywords: credit risk; default rate; loss given default
Host item entry: 32nd International Conference Mathematical Methods in Economics MME 2014, ISBN 978-80-244-4209-9

Institution: Institute of Information Theory and Automation AS ČR (web)
Document availability information: Fulltext is available at external website.
External URL: http://library.utia.cas.cz/separaty/2014/E/smid-0431755.pdf
Original record: http://hdl.handle.net/11104/0237644

Permalink: http://www.nusl.cz/ntk/nusl-175700


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