This study examines the pricing of credit derivatives using the structural modeling framework. These types of models are known to have problems with accurately valuing derivative securities. To address these problems, this study proposes incorporating additional sources of risk associated with balance sheet dynamics. Specifically, the study introduces the hypothesis of imperfect balance sheet information (as previously explored by Duffie and Lando), which produces a realistic channel for the short-horizon default risk. Moreover, a stochastic time allowing for jumps is incorporated to capture the increased uncertainty over longer horizons, which could be linked to upcoming news or legal issues. Overall, the study demonstrates how these modifications can enhance the predictive power of structural models and improve their usefulness in real-world applications.
{"title":"Pricing default risk in stochastic time","authors":"Antti J. harju","doi":"10.21314/jcr.2023.004","DOIUrl":"https://doi.org/10.21314/jcr.2023.004","url":null,"abstract":"This study examines the pricing of credit derivatives using the structural modeling framework. These types of models are known to have problems with accurately valuing derivative securities. To address these problems, this study proposes incorporating additional sources of risk associated with balance sheet dynamics. Specifically, the study introduces the hypothesis of imperfect balance sheet information (as previously explored by Duffie and Lando), which produces a realistic channel for the short-horizon default risk. Moreover, a stochastic time allowing for jumps is incorporated to capture the increased uncertainty over longer horizons, which could be linked to upcoming news or legal issues. Overall, the study demonstrates how these modifications can enhance the predictive power of structural models and improve their usefulness in real-world applications.","PeriodicalId":44244,"journal":{"name":"Journal of Credit Risk","volume":"266 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136028686","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Dynamic class-imbalanced financial distress prediction based on case-based reasoning integrated with time weighting and resampling","authors":"Jie Sun, Mingyang Sun, Mengru Zhao, Yingying Du","doi":"10.21314/jcr.2022.006","DOIUrl":"https://doi.org/10.21314/jcr.2022.006","url":null,"abstract":"","PeriodicalId":44244,"journal":{"name":"Journal of Credit Risk","volume":"14 1","pages":""},"PeriodicalIF":0.3,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88278646","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Default forecasting based on a novel group feature selection method for imbalanced data","authors":"Guotai Chi, Jin Xing, Ancheng Pan","doi":"10.21314/jcr.2023.005","DOIUrl":"https://doi.org/10.21314/jcr.2023.005","url":null,"abstract":"","PeriodicalId":44244,"journal":{"name":"Journal of Credit Risk","volume":"13 1","pages":""},"PeriodicalIF":0.3,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82494824","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Instabilities in Cox proportional hazards models in credit risk","authors":"J. Breeden, A. Bellotti, Ye. A. Leonova","doi":"10.21314/jcr.2022.014","DOIUrl":"https://doi.org/10.21314/jcr.2022.014","url":null,"abstract":"","PeriodicalId":44244,"journal":{"name":"Journal of Credit Risk","volume":"14 1","pages":""},"PeriodicalIF":0.3,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79109496","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Calibration alternatives to logistic regression and their potential for transferring the statistical dispersion of discriminatory power into uncertainties in probabilities of default","authors":"Jan Henrik Wosnitza","doi":"10.21314/jcr.2022.005","DOIUrl":"https://doi.org/10.21314/jcr.2022.005","url":null,"abstract":"","PeriodicalId":44244,"journal":{"name":"Journal of Credit Risk","volume":"78 1","pages":""},"PeriodicalIF":0.3,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80995181","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Managerial connections and corporate risk-taking: evidence from the Great Recession","authors":"N. Chidambaran, Stefano Manfredonia","doi":"10.21314/jcr.2022.007","DOIUrl":"https://doi.org/10.21314/jcr.2022.007","url":null,"abstract":"","PeriodicalId":44244,"journal":{"name":"Journal of Credit Risk","volume":"39 1","pages":""},"PeriodicalIF":0.3,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78877516","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Small and medium-sized enterprises’ time to default: an analysis using an improved mixture cure model with time-varying covariates","authors":"Qingli Dong, Guotai Chi","doi":"10.21314/jcr.2022.013","DOIUrl":"https://doi.org/10.21314/jcr.2022.013","url":null,"abstract":"","PeriodicalId":44244,"journal":{"name":"Journal of Credit Risk","volume":"95 1","pages":""},"PeriodicalIF":0.3,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81413438","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Banking on personality: psychometrics and consumer creditworthiness","authors":"Saul Fine","doi":"10.21314/jcr.2023.001","DOIUrl":"https://doi.org/10.21314/jcr.2023.001","url":null,"abstract":"","PeriodicalId":44244,"journal":{"name":"Journal of Credit Risk","volume":"1 1","pages":""},"PeriodicalIF":0.3,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83424376","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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