Two Models of Stochastic Loss Given Default
Copyright policy )Two Models of Stochastic Loss Given Default
We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events accounting for correlations between the default events and the associated losses. We show how the models can be calibrated and analyze the impact of correlations between the occurrences of defaults and recoveries by testing our models for a representative sample portfolio.
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- Mathematical Sciences Research Institute United States
FOS: Economics and business, Risk Management (q-fin.RM), Pricing of Securities (q-fin.PR), Quantitative Finance - Pricing of Securities, Quantitative Finance - Risk Management
FOS: Economics and business, Risk Management (q-fin.RM), Pricing of Securities (q-fin.PR), Quantitative Finance - Pricing of Securities, Quantitative Finance - Risk Management
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