Dynamic credit models

Dynamic Interest Rate and Credit Risk Models

Dependence Properties of Dynamic Credit Risk Models

We give a unified mathematical framework for reduced-form models for portfolio credit risk and identify properties which lead to positive dependence of default times. Dependence in the default hazard rates is modeled by common macroeconomic factors as well as by inter-obligor links. It is shown that popular models produce positive dependence between defaults in terms of association. Implication...

Dynamic credit portfolio modelling in structural models with jumps

We present a structural jump-diffusion credit-portfolio model which models the loss distribution and dependence structure of the portfolio dynamically. We are able to obtain the log-asset correlation analytically and precise estimates of the term-structure of default correlations within the model. The models allows the simultaneous pricing of bonds, CDS and portfolio derivatives across all matu...

Forecasting and stress testing credit card default using dynamic models

We present discrete time survival models of borrower default for credit cards that include behavioural data about credit card holders and macroeconomic conditions across the credit card lifetime. We find that dynamic models which include these behavioural and macroeconomic variables provide statistically significant improvements in model fit, which translate into better forecasts of default at ...

Credit Barrier Models

The model introduced in this article is designed to provide a consistent representation for both the real-world and pricing measures for the credit process. We find that good agreement with historical and market data can be achieved across all credit ratings simultaneously. The model is characterized by an underlying stochastic process that represents credit quality and default events are assoc...