Merton models
Multi-factor default correlation model estimation: enhancement with bootstrapping
The authors propose using a three-factor Merton model to allow more accurate quantification when investigating the credit risk of portfolios.
The optimal investment problem in stochastic and local volatility models
This paper considers the classical optimal investment allocation problem of Merton through the lens of some more modern approaches, such as the stochastic volatility and local volatility models.
Podcast: Richard Martin on EM debt, copulas, machine learning
Quant sceptical of machine learning algos and black boxes
A credit portfolio framework under dependent risk parameters: probability of default, loss given default and exposure at default
This paper introduces a credit portfolio framework that allows for dependencies between default probabilities, secured and unsecured recovery rates and exposures at default (EADs).
Credit risk: taking fluctuating asset correlations into account
This paper puts forward an ensemble approach for asset correlations.
Don't blame the quants, says Merton
Quantitative models were unfairly criticised in the aftermath of the financial crisis, says legendary quant and co-creator of the Black-Scholes equation, but there’s plenty for quants to work on in the current environment
Profile: NYU’s Robert Engle on volatility, liquidity and systemic risk
An Arch economist
Marking systemic portfolio risk with the Merton model
Marking systemic portfolio risk with the Merton model
Capturing credit correlation between counterparty and underlying
Capturing credit correlation between counterparty and underlying
Lifetime achievement award: John Hull
Risk awards 2011
Smiling jumps
Smiling jumps
Quant Congress USA: UK and Netherlands least risky European debt
Relatively healthy private sector means UK and Netherlands least likely to default
Variance-covariance-based risk allocation in credit portfolios
Mikhail Voropaev proposes high-precision analytical approximation for variance-covariance-based risk allocation in a portfolio of risky assets. A general case of a single-period multi-factor Merton-type model with stochastic recovery is considered. The…
Low-default portfolios without simulation
Low-default portfolios are a key Basel II implementation challenge, and various statistical techniques have been proposed for use in PD estimation for such portfolios. To produce estimates using these techniques, typically Monte Carlo simulation is…
A saddle for complex credit portfolio models
Guido Giese applies the saddle-point approximation to analyse tail losses for very general credit portfolios, including correlated defaults, stochastic recovery rates, and dependency between default probabilities and recovery rates. The numerical…
A Merton approach to transfer risk
Transfer risk is the risk that debtors in a country are unable to ensure timely payments of foreign currency debt service due to transfer or exchange restrictions, or a general lack of foreign currency. Although this risk is not extensively addressed in…