Copulas and Credit Risk Models

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F18%3A10242071" target="_blank" >RIV/61989100:27510/18:10242071 - isvavai.cz</a>
Result on the web
<a href="https://is.muni.cz/do/econ/sborniky/2018/Proceedings_finalni_verze_September_3.pdf" target="_blank" >https://is.muni.cz/do/econ/sborniky/2018/Proceedings_finalni_verze_September_3.pdf</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Copulas and Credit Risk Models
Original language description
The topic of this paper is copulas and credit risk models. Generally, there is a core implicit assumption of credit risk models that the critical variables are normally distributed, which is too simplified in the reality. There is no compelling reason for choosing the normal distribution. Therefore, the goal of this paper is to find out the real distributions based on the concept of copulas and then better quantify the credit risk. There is a portfolio that consists of ten bonds issued by quoted companies in the Frankfurt Stock Exchange (FSE) with a 10-million-euro total nominal value over one year, from January 9th, 2017 to January 8th, 2018. The credit risk of the portfolio is quantified under the framework of the CreditMetrics (TM) model, a typical industry example of the threshold models. Two main types of copulas include elliptical copulas and Archimedean copulas. The parameters of a parametric copula are estimated by MLE and then the copula is selected by computing AIC and BIC. Compared with the original CreditMetrics (TM) model with an assumption of normal distribution, the probability density curve obtained based on copulas are more right-tailed and the credit risk of the portfolio is better quantified.
Czech name
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Czech description
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Publication year
2018
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
European Financial Systems 2018 : proceedings of the 15th international scientific conference : June 25-26, 2018, Brno, Czech Republic
ISBN
978-80-210-8980-8
ISSN
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e-ISSN
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Number of pages
8
Pages from-to
780-787
Publisher name
Masarykova univerzita
Place of publication
Brno
Event location
Brno
Event date
Jun 25, 2018
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
000462948800099

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