Technical paper/Default risk
Research on listed companies’ credit ratings, considering classification performance and interpretability
This study uses the correlation coefficient and F-test to select the initial features of a credit evaluation system, and then a validity index for a second selection to ensure that the feature system has the optimum ability to discriminate in determining…
Determination of weights for an optimal credit rating model based on default and nondefault distance maximization
This study proposes a credit rating model that accurately identifies default and nondefault companies by maximizing intergroup credit score deviations and minimizing intragroup deviations.
The economics of debt collection, with attention to the issue of salience of collections at the time credit is granted
This paper considers the role of policies that protect consumers from aggressive debt collection tactics.
Bank leverage and capital bias adjustment through the macroeconomic cycle
The author assesses the quantitative effects of the recent proposal for more robust bank capital adequacy.
KVA as a transfer of wealth
A capital valuation adjustment designed to preserve a firm’s value to shareholders is introduced
Pricing multiple barrier derivatives under stochastic volatility
This work generalizes existing one- and two-dimensional pricing formulas with an equal number of barriers to a setting of n dimensions and up to two barriers in the presence of stochastic volatility.
Corporate default risk modeling under distressed economic and financial conditions in a developing economy
The authors create stepwise logistic regression models to predict the probability of default for private nonfinancial firms under distressed financial and economic conditions in a developing economy. Their main aim is to identify and interpret the…
Benchmarking loss given default discount rates
This paper provides a theoretical and empirical analysis of alternative discount rate concepts for computing loss given default rates using historical bank workout data.
Elliptical and Archimedean copula models: an application to the price estimation of portfolio credit derivatives
This paper explores the impact of elliptical and Archimedean copula models on the valuation of basket default swaps.
Covid-19 and the credit cycle
The Covid-19 health crisis has dramatically affected just about every aspect of the economy, including the transition from a record long benign credit cycle to a stressed one, with still uncertain dimensions. This paper seeks to assess the credit climate…
An alternative statistical framework for credit default prediction
This study compares the gradient-boosting model with four other well-known classifiers, namely, a classification and regression tree (CART), logistic regression (LR), multivariate adaptive regression splines (MARS) and a random forest (RF).
Two-factor Black-Karasinski pricing kernel
Analytic formulas for bond prices and forward rates are derived by expanding existing rate models
Interpretability of neural networks: a credit card default model example
Recently developed techniques aimed at answering interpretability issues in neural networks are tested and applied to a retail banking case
On probability of default and its relation to observed default frequency and a common factor
This paper considers a definition of through-the-cycle as independent from an economic state that can result in a time-varying TTC probability of default.
Default cascades and systemic risk on different interbank network topologies
This paper examines the relationship between the topology of interbank networks and their ability to propagate localized, idiosyncratic shocks across the banking sector via banks’ interbank claims on one another.
Reducing margin procyclicality at central counterparties
This paper studies the effect of less procyclical margin models on cleared volumes and risk taking in a stylized CCP.
Forecasting corporate defaults in the German stock market
In this paper, the authors estimate and test several default risk models using new and unique data on corporate defaults in the German stock market.
Credit default prediction using a support vector machine and a probabilistic neural network
In this study, the authors address the fact that the ranking of classifiers varies for different criteria with measures under different circumstances, by proposing the simultaneous application of support vector machine and probabilistic neural network …
Model risk in the Fundamental Review of the Trading Book: the case of the Default Risk Charge
This paper assesses the model risk associated with the copula choice for the calculation of the Default Risk Charge (DRC) measure.
Risk mutualization and financial stability: recovering and resolving a central counterparty
This paper investigates how financial market participants respond to risk mutualization implemented by a CCP using assessments after a large credit loss.
Issuer bias in corporate ratings toward financially constrained firms
This paper considers whether the rating agency attempts to mitigate the feedback effect through its rating actions. Using Moody’s issuer ratings over 1982–2009, the paper shows that firms with greater external financing constraints are less likely to be…
Portfolio credit risk model with extremal dependence of defaults and random recovery
This paper proposes a portfolio credit risk model with random recovery rates.
Goodness-of-fit for discrete-choice models of borrower default
This paper demonstrates that the rank-order tests are unreliable for assessing models to be used to predict probabilities.