Hostname: page-component-89b8bd64d-ksp62 Total loading time: 0 Render date: 2026-05-07T02:45:51.367Z Has data issue: false hasContentIssue false
  • English
  • Français

COMPARISON OF DEPENDENCE IN FACTOR MODELS WITH APPLICATION TO CREDIT RISK PORTFOLIOS

Published online by Cambridge University Press:  18 December 2007

Michel Denuit  and
Esther Frostig
Michel Denuit
Affiliation:
Institut de Sciences Actuarielles & Institut de Statistique Université Catholique de LouvainLouvain-la-Neuve, Belgium E-mail: michel.denuit@uclouvain.be
Esther Frostig
Affiliation:
Department of StatisticsUniversity of HaifaHaifa, Israel E-mail: frostig@stat.haifa.ac.il
Get access Rights & Permissions [Opens in a new window]

Abstract

This article considers portfolio credit risk models of factor type. The dependence between the individual defaults is driven by a small number of systematic factors. The present work aims to investigate the effect of increasing the strength of the dependence between systematic factors on the default indicators in standard credit risk models. The intensity of the dependence is measured by means of appropriate multivariate stochastic orderings, based on the comparison of supermodular and ultramodular functions.

Information

Type
Research Article
Information
Probability in the Engineering and Informational Sciences , Volume 22 , Issue 1 , January 2008 , pp. 151 - 160
Copyright
Copyright © Cambridge University Press 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

1.Denuit, M., Dhaene, J., Goovaerts, M.J., & Kaas, R. (2005). Actuarial theory for dependent risks: Measures, orders and models. New York: Wiley.CrossRefGoogle Scholar
2.Denuit, M. & Müller, A. (2002). Smooth generators of integral stochastic orders. Annals of Applied Probability 12: 1174–1184.CrossRefGoogle Scholar
3.Frey, R. & McNeil, A. (2003). Dependent defaults in models of portfolio credit risk. Journal of Risk 6: 59–92.CrossRefGoogle Scholar
4.Gordy, M. (2000). A comparative anatomy of credit risk models. Journal of Banking and Finance 24: 119–149.CrossRefGoogle Scholar
5.McNeil, A.J., Frey, R., & Embrechts, P. (2005). Quantitative risk management: Concepts, techniques and tools. Princeton Series in Finance. Princeton, NJ: Princeton University Press.Google Scholar
6.Marinacci, M. & Montrucchio, L. (2005). Ultramodular functions. Mathematics of Operations Research 30: 311–332.CrossRefGoogle Scholar