Geurdes, Han / J.F. (2011): Macroeconomy in models for default probability.

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Abstract
We inspect the question how to adapt to macroeconomical variables those probability of default (PD) estimates where Merton's model assumptions cannot be used. The need for this is to obtain trustworthy estimates of PD from a given economical situation. The structure of a known marketcredit risk model is adapted. The key concept in this adaptation is the assumption of a different probabilistic situation for a firm before and at (first) default. If a corporate firm defaults we use a different probabilistic relation between macroeconomical and market risk than in a firm's normal not default operation. We found a remarkable resemblance between relativity of physical spacetime and the economical framework of variables. This means a solution of the calibration problem without using a Gaussian distribution estimates of the default probability.
Item Type:  MPRA Paper 

Original Title:  Macroeconomy in models for default probability. 
English Title:  Macroeconomy in models for default probability. 
Language:  English 
Keywords:  English 
Subjects:  C  Mathematical and Quantitative Methods > C6  Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C65  Miscellaneous Mathematical Tools G  Financial Economics > G3  Corporate Finance and Governance > G32  Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill C  Mathematical and Quantitative Methods > C0  General > C01  Econometrics C  Mathematical and Quantitative Methods > C6  Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C60  General 
Item ID:  32666 
Depositing User:  Han / J. F. Geurdes 
Date Deposited:  11. Aug 2011 11:11 
Last Modified:  15. Feb 2013 02:40 
References:  [1] X. An, Macroeconomic conditions, systematic risk factors, and time series dynamics of commercial mortgage credit risk, Preprint (2007) University Southern California, USA. [2] M. Hillebrand, Modeling and estimating loss given default, Preprint(2006) University Munchen, Germany. [3] P.A. Samuelson, Foundations of Economic Analysis, (1975), p 548561 Harvard University Press Camb. Mass., USA. [4] A. Kreinin, A. Nagi, Calibration of the default probability model, European Journal of Operational Research (2006), doi: 10.1016/j.eor.2004.11.029. [5] A.D. Polyani, Linear Wave Equation (2004), http://eqworld.ipmnet.ru/en/solutions/lpde/lpde201.pdf 
URI:  http://mpra.ub.unimuenchen.de/id/eprint/32666 