The new Basel Capital Accord (Basel II) is going to be embedded in the risk management practices at many financial institutions shortly, but the academic and financial world are still discussing about several topics related to the new capital adequacy rules. One of the most important and prominent examples among these topics is the link between loss given default (LGD) and the economic cycle. I...

This paper proposes and examines a new structural risk of default model for banks in frictional fuzzy financial markets. It is motivated by the need to fill shortcomings probability-based credit metric models that are characterised unrealistic assumptions such as crisply precise constant risk-free rates return. The problem investigated here specifically Kealhofer–Merton–Vasicek (KMV)-type estim...

Abstract New energy unit output prediction error probability characteristics analysis and decision alternatives to the system are of great significance. The conventional analytical model based on a specific form is not flexible enough describe distribution law actual new energy, there errors. In order suppress impact uncertainty, centralized usually needs be equipped with storage applications s...

The methods of the class of Kalman filters have recently been used in the estimation of the term structure of interest rates. These methods can employ both time-series and cross-sectional aspects of term structure models. This paper compares the performance of two kinds of non-linear Kalman filter algorithms Extended Kalman Filter (EKF) and Square-Root Unscented Kalman Filter (SRUKF) in estimat...

Multiname default modeling is crucial in the context of pricing credit derivatives such as Collaterized Debt Obligations (CDOs). We consider here a simple reduced form approach for multiname defaults based on the Vasicek or Ornstein-Uhlenbeck model for the hazard rates of the underlying names. We analyze the impact of volatility time scales on the default distribution and CDO prices. We demonst...

OF THE DISSERTATION Markov Chain Monte Carlo Estimation Of Multi-Factor Affine Term-Structure Models by He Hu Doctoral of Philosophy in Statistics University of California, Los Angeles, 2005 Professor Jun Liu, Co-Chair Professor Yingnian Wu, Co-Chair This dissertation develops a Bayesian state-space model of the term structure of interest rates. We propose a hybrid Markov Chain Monte Carlo (MCM...

This paper points out that the fundamental partial differential equation (PDE) implies that the drifts of the underlying processes are irrelevant, regardless whether the state factors are tradable or not. Since the simple boundary condition for default-free discount bonds can be satisfied by a linear discount function, the variances and covariances of the underlying processes are also irrelevan...

To measure the contribution of individual transactions inside the total risk of a credit portfolio is a major issue in financial institutions. VaR Contributions (VaRC) and Expected Shortfall Contributions (ESC) have become two popular ways of quantifying the risks. However, the usual Monte Carlo (MC) approach is known to be a very time consuming method for computing these risk contributions. In...

A Bayesian nonparametric estimator to entropy is proposed. The derivation of the new relies on using Dirichlet process and adapting well-known frequentist estimators Vasicek (Journal Royal Statistical Society B 38 (1976) 54–59) Ebrahimi, Pflughoeft Soofi (Statistics & Probability Letters 20 (1994) 225–234). Several theoretical properties, such as consistency, proposed are obtained. quality has ...