IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Recent Advances in Credit Risk Modeling

  • Jose Giancarlo Gasha
  • Andre Santos
  • Jorge A. Chan-Lau
  • Carlos I. Medeiros
  • Marcos Souto
  • Christian Capuano

As is well known, most models of credit risk have failed to measure the credit risks in the context of the global financial crisis. In this context, financial industry representatives, regulators and academics worldwide have given new impetus to efforts to improve credit risk modeling for countries, corporations, financial institutions, and financial instruments. The paper summarizes some of the recent advances in this regard. It considers modifications of structural models, including of the classical Merton model, and efforts to reconcile the structural and the reduced-form models. It also discusses the reassessment of the default correlations using copulas, the pricing of credit index options, and the determination of the prices of distressed debt and estimation of recovery values.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=23125
Download Restriction: no

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/162.

as
in new window

Length: 31
Date of creation: 01 Aug 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/162
Contact details of provider: Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htmEmail:


More information through EDIRC

Order Information: Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Xin Guo & Robert A. Jarrow & Yan Zeng, 2009. "Modeling The Recovery Rate In A Reduced Form Model," Mathematical Finance, Wiley Blackwell, vol. 19(1), pages 73-97.
  2. Umut Cetin & Robert Jarrow & Philip Protter & Yildiray Yildirim, 2004. "Modeling Credit Risk with Partial Information," Papers math/0407060, arXiv.org.
  3. Christian Capuano, 2008. "The Option-Ipod. the Probability of Default Implied by Option Prices Basedon Entropy," IMF Working Papers 08/194, International Monetary Fund.
  4. Jarrow, Robert A & Turnbull, Stuart M, 1995. " Pricing Derivatives on Financial Securities Subject to Credit Risk," Journal of Finance, American Finance Association, vol. 50(1), pages 53-85, March.
  5. Darrell DUFFIE & Andreas ECKNER & Guillaume HOREL & Leandro SAITA, . "Frailty Correlated Default," Swiss Finance Institute Research Paper Series 08-44, Swiss Finance Institute.
  6. Bates, David S, 1996. "Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Deutsche Mark Options," Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 69-107.
  7. Robert A. Jarrow, 2001. "Counterparty Risk and the Pricing of Defaultable Securities," Journal of Finance, American Finance Association, vol. 56(5), pages 1765-1799, October.
  8. Xin Huang & Hao Zhou & Haibin Zhu, 2009. "A framework for assessing the systemic risk of major financial institutions," Finance and Economics Discussion Series 2009-37, Board of Governors of the Federal Reserve System (U.S.).
  9. Jorge A. Chan-Lau & Toni Gravelle, 2005. "The End; A New Indicator of Financial and Nonfinancial Corporate Sector Vulnerability," IMF Working Papers 05/231, International Monetary Fund.
  10. Harrison, J. Michael & Pliska, Stanley R., 1981. "Martingales and stochastic integrals in the theory of continuous trading," Stochastic Processes and their Applications, Elsevier, vol. 11(3), pages 215-260, August.
  11. Giesecke, Kay, 2004. "Correlated default with incomplete information," Journal of Banking & Finance, Elsevier, vol. 28(7), pages 1521-1545, July.
  12. Xin Guo & Robert Jarrow & Haizhi Lin, 2008. "Distressed debt prices and recovery rate estimation," Review of Derivatives Research, Springer, vol. 11(3), pages 171-204, October.
  13. Arnaud Jobert & Janet Kong & Jorge A. Chan-Lau, 2004. "An Option-Based Approach to Bank Vulnerabilities in Emerging Markets," IMF Working Papers 04/33, International Monetary Fund.
  14. Merton, Robert C., 1973. "On the pricing of corporate debt: the risk structure of interest rates," Working papers 684-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  15. Philippe Jorion, 1988. "On Jump Processes in the Foreign Exchange and Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 427-445.
  16. Gropp, Reint & Vesala, Jukka & Vulpes, Giuseppe, 2006. "Equity and Bond Market Signals as Leading Indicators of Bank Fragility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(2), pages 399-428, March.
  17. Robert A. Jarrow, 2009. "Credit Risk Models," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 37-68, November.
  18. Andre Santos & Jorge A. Chan-Lau, 2006. "Currency Mismatches and Corporate Default Risk; Modeling, Measurement, and Surveillance Applications," IMF Working Papers 06/269, International Monetary Fund.
  19. Jarrow, Robert A & Lando, David & Turnbull, Stuart M, 1997. "A Markov Model for the Term Structure of Credit Risk Spreads," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 481-523.
  20. Kexue Liu & Jean Salvati & Renzo G. Avesani & Alin Mirestean, 2006. "Review and Implementation of Credit Risk Models of the Financial Sector Assessment Program (FSAP)," IMF Working Papers 06/134, International Monetary Fund.
  21. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June.
  22. Hoi Wong & Tsz Wong, 2007. "Reduced-form Models with Regime Switching: An Empirical Analysis for Corporate Bonds," Asia-Pacific Financial Markets, Springer, vol. 14(3), pages 229-253, September.
  23. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
  24. Duffie, Darrell & Lando, David, 2001. "Term Structures of Credit Spreads with Incomplete Accounting Information," Econometrica, Econometric Society, vol. 69(3), pages 633-64, May.
  25. Geske, Robert, 1977. "The Valuation of Corporate Liabilities as Compound Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(04), pages 541-552, November.
  26. Claudia Ceci & Anna Gerardi, 2006. "A Model For High Frequency Data Under Partial Information: A Filtering Approach," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 9(04), pages 555-576.
  27. Massimo Morini & Damiano Brigo, 2008. "Arbitrage-free Pricing of Credit Index Options: The no-armageddon pricing measure and the role of correlation after the subprime crisis," Papers 0812.4156, arXiv.org.
  28. Dumas, Bernard & Jennergren, L. Peter & Naslund, Bertil, 1995. "Siegel's paradox and the pricing of currency options," Journal of International Money and Finance, Elsevier, vol. 14(2), pages 213-223, April.
  29. Duffie, Darrell & Singleton, Kenneth J, 1999. "Modeling Term Structures of Defaultable Bonds," Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 687-720.
  30. Crouhy, Michel & Galai, Dan & Mark, Robert, 2000. "A comparative analysis of current credit risk models," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 59-117, January.
  31. S. G. Kou, 2002. "A Jump-Diffusion Model for Option Pricing," Management Science, INFORMS, vol. 48(8), pages 1086-1101, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:09/162. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)

or (Hassan Zaidi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.