Frailty Correlated Default
- 19 October 2006
- preprint
- Published by Elsevier in SSRN Electronic Journal
Abstract
We analyze portfolio credit risk in light of dynamic "frailty," by which the credit qualities of different firms depend on common unobservable time-varying default covariates. Frailty is estimated to have a large impact on estimated conditional mean default rates, above and beyond those predicted by observable factors, and to cause a large increase in the likelihood of large default losses for portfolios of U.S. corporate bonds during 1980-2004.Keywords
All Related Versions
This publication has 49 references indexed in Scilit:
- Is Credit Event Risk Priced? Modeling Contagion via the Updating of Beliefs.Published by National Bureau of Economic Research ,2010
- Inference in Hidden Markov ModelsPublished by Springer Nature ,2005
- Forecasting Default with the KMV-Merton ModelSSRN Electronic Journal, 2004
- A General Formula for Valuing Defaultable SecuritiesEconometrica, 2004
- Bankruptcy Prediction with Industry EffectsEuropean Finance Review, 2004
- Spatial Interaction and the Statistical Analysis of Lattice SystemsJournal of the Royal Statistical Society Series B: Statistical Methodology, 1974
- The Pricing of Options and Corporate LiabilitiesJournal of Political Economy, 1973
- A Maximization Technique Occurring in the Statistical Analysis of Probabilistic Functions of Markov ChainsThe Annals of Mathematical Statistics, 1970
- Financial Ratios, Discriminant Analysis and the Prediction of Corporate BankruptcyThe Journal of Finance, 1968
- Market Prices, Financial Ratios, and the Prediction of FailureJournal of Accounting Research, 1968