Dr. Peter Schaller started his professional career as University lecturer in the field of Theoretical Physics and joined the banking industry in 1995. He developed internal market and counterparty risk models for Bank Austria, now part of the UniCredit group and Raiffeisen Bank International. His current focus is on the development of behavioural models for non maturing deposits and credit prepayments. His research and development activities are reflected in numerous publications. Besides his work for the bank he continues to give lectures at the Technical University of Vienna.
An internal default risk model: simulation of default times and recovery rates within the new Fundamental Review of the Trading Book framework
This paper presents a new default risk model for market risk that is consistent with these requirements. The recovery rates follow a waterfall model that is based on a minimum entropy principle.