This paper presents a framework for estimating losses for residential mortgage loans. At the core is a transitions-based probability of default model which yields directly observable cash-flows at the loan level. The estimated model includes coefficients on unemployment, Loan to Value ratio and interest rates, all of which allow a macroeconomic scenario to be fed through the model and impact lo...

The increasing demand for pulpwood promotes the rapid expansion of eucalypt plantations over fire-prone savannas in western Brazil. Currently, large wildfires pose a real threat to these commercial plantations, disrupting supply chain. Forest managers lack site-specific quantitative assessments inform scale harvesting plans and cost-effective risk reduction programs. In this study, we combined ...

This report describes the use of Bayesian Networks (BNs) to model statistical loss distributions in financial operational risk scenarios. Its’ focus is on modelling “thick” tail, or unexpected, loss events using mixtures of appropriate loss frequency and severity distributions where these mixtures are conditioned on causal variables that model the capability or effectiveness of the underlying c...

This internet appendix contains supplemental materials for the published article. It is organized as follows. Section A uses a simple example to illustrate how comovements among risk prices, default probabilities, and default losses raise the present value of expected default losses. Section B illustrates the scaling property. Section C provides detailed proofs of several propositions and formu...

uncertainty inherent in the financial market was usually consid- ered to be random. however, randomness is only one special type of uncer- tainty and appropriate when describing objective information. for describing subjective information it is preferred to assume that uncertainty is fuzzy. this paper defines the expected payoof trading strategies in a fuzzy financial market within the framewor...

Uncertainty theory is a branch of mathematics based on normality, monotonicity, self-duality, countable subadditivity, and product measure axioms. Different from randomness and fuzziness, uncertainty theory provides a new mathematical model for uncertain phenomena. A key concept to describe uncertain quantity is uncertain variable, and expected value operator provides an average value of uncert...