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Beta Binomial Distribution with Temporal Correlation

In: Urn Models and Their Applications in Finance

Author

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  • Masato Hisakado

    (Nomura Hodings, Inc.)

Abstract

Estimations of the probability of default (PD) and default correlation have been obtained from empirical studies on historical data from credit events. These two parameters are important for pricing financial products, such as synthetic Collateralized Debt Obligation (CDO) (Schönbucher 2003). Also called “long run PDs”, these parameters are important to financial institutions for portfolio management and risk management. If the number of defaults is minimal, it is not easy to estimate these parameters (Pluto and Tasche 2011; Benjamin et al. 2001).

Suggested Citation

  • Masato Hisakado, 2025. "Beta Binomial Distribution with Temporal Correlation," Springer Books, in: Urn Models and Their Applications in Finance, chapter 0, pages 155-169, Springer.
    • Handle: RePEc:spr:sprchp:978-981-96-3825-3_10
    DOI: 10.1007/978-981-96-3825-3_10
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