A coupled Markov chain approach to credit risk modeling
AbstractWe propose a Markov chain model for credit rating changes. We do not use any distributional assumptions on the asset values of the rated companies but directly model the rating transitions process. The parameters of the model are estimated by a maximum likelihood approach using historical rating transitions and heuristic global optimization techniques.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 36 (2012)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/jedc
Credit risk; Markov models; Ratings; Conditional value-at-risk; Bond portfolios;
Other versions of this item:
- David Wozabal & Ronald Hochreiter, 2009. "A Coupled Markov Chain Approach to Credit Risk Modeling," Papers 0911.3802, arXiv.org, revised Jan 2014.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G01 - Financial Economics - - General - - - Financial Crises
- C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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