Geurdes, Han / J.F. (2011): Macro-economy in models for default probability.
Download (216kB) | Preview
We inspect the question how to adapt to macro-economical 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 market-credit 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 macro-economical and market risk than in a firm's normal not default operation. We found a remarkable resemblance between relativity of physical space-time 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:||Macro-economy in models for default probability.|
|English Title:||Macro-economy in models for default probability.|
|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
|Depositing User:||Han / J. F. Geurdes|
|Date Deposited:||11. Aug 2011 11:11|
|Last Modified:||15. Feb 2013 02:40|
 X. An, Macroeconomic conditions, systematic risk factors, and time series dynamics of commercial mortgage credit risk, Preprint (2007) University Southern California, USA.
 M. Hillebrand, Modeling and estimating loss given default, Preprint(2006) University Munchen, Germany.
 P.A. Samuelson, Foundations of Economic Analysis, (1975), p 548-561 Harvard University Press Camb. Mass., USA.
 A. Kreinin, A. Nagi, Calibration of the default probability model, European Journal of Operational Research (2006), doi: 10.1016/j.eor.2004.11.029.
 A.D. Polyani, Linear Wave Equation (2004), http://eqworld.ipmnet.ru/en/solutions/lpde/lpde201.pdf