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On Infectious Model for Dependent Defaults by Gu, Jia-Wen; Ching, Wai-Ki; Siu, Tak-Kuen; Zheng, Harry is a scholarly article available to read on EtoBox.

What is On Infectious Model for Dependent Defaults about?

In this paper, we propose a two-sector Markovian infectious model, which is an extension of Greenwood's model. The central idea of this model is that the causality of defaults of two sectors is in both direction, which enrich dependence dynamics. The Bayesian Information Criterion is adopted to compare the proposed model with the two-sector model in credit literature using the real data. We find that the newly proposed model is statistically better than the model in past literature. We also introduce two measures: CRES and CRVaR to give risk evaluation of our model.

Author

Gu, Jia-Wen; Ching, Wai-Ki; Siu, Tak-Kuen; Zheng, Harry

Published

2013

Language

EN