Advanced

Credit risk - A structural model with jumps and correlations

Schäfer, Rudi LU ; Sjolin, Markus; Sundin, Andreas; Wolanski, Michal and Guhr, Thomas LU (2007) In Physica A: Statistical Mechanics and its Applications 383(2). p.533-569
Abstract
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump-diffusion process for the risk factors, i.e. for the company assets. We also include correlations between the companies. We discuss that models of this type have much in common with other problems in statistical physics and in the theory of complex systems. We study a simplified version of our model analytically. Furthermore, we perform extensive numerical simulations for the full model. The observables are the loss distribution of the credit portfolio, its moments and other quantities derived thereof. We compile detailed information about the parameter dependence of these observables. In the course of... (More)
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump-diffusion process for the risk factors, i.e. for the company assets. We also include correlations between the companies. We discuss that models of this type have much in common with other problems in statistical physics and in the theory of complex systems. We study a simplified version of our model analytically. Furthermore, we perform extensive numerical simulations for the full model. The observables are the loss distribution of the credit portfolio, its moments and other quantities derived thereof. We compile detailed information about the parameter dependence of these observables. In the course of setting up and analyzing our model, we also give a review of credit risk modeling for a physics audience. (c) 2007 Elsevier B.V. All rights reserved. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
stochastic processes, credit risk, econophysics
in
Physica A: Statistical Mechanics and its Applications
volume
383
issue
2
pages
533 - 569
publisher
Elsevier
external identifiers
  • wos:000248632800032
  • scopus:34447101582
ISSN
0378-4371
DOI
10.1016/j.physa.2007.04.053
language
English
LU publication?
yes
id
d0c334dc-b85b-42df-b171-e1453789ff5b (old id 691366)
date added to LUP
2008-01-02 14:01:51
date last changed
2017-01-01 06:41:54
@article{d0c334dc-b85b-42df-b171-e1453789ff5b,
  abstract     = {We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump-diffusion process for the risk factors, i.e. for the company assets. We also include correlations between the companies. We discuss that models of this type have much in common with other problems in statistical physics and in the theory of complex systems. We study a simplified version of our model analytically. Furthermore, we perform extensive numerical simulations for the full model. The observables are the loss distribution of the credit portfolio, its moments and other quantities derived thereof. We compile detailed information about the parameter dependence of these observables. In the course of setting up and analyzing our model, we also give a review of credit risk modeling for a physics audience. (c) 2007 Elsevier B.V. All rights reserved.},
  author       = {Schäfer, Rudi and Sjolin, Markus and Sundin, Andreas and Wolanski, Michal and Guhr, Thomas},
  issn         = {0378-4371},
  keyword      = {stochastic processes,credit risk,econophysics},
  language     = {eng},
  number       = {2},
  pages        = {533--569},
  publisher    = {Elsevier},
  series       = {Physica A: Statistical Mechanics and its Applications},
  title        = {Credit risk - A structural model with jumps and correlations},
  url          = {http://dx.doi.org/10.1016/j.physa.2007.04.053},
  volume       = {383},
  year         = {2007},
}