Conference Paper: On infectious models for dependent default risk

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Publisher Website: 10.1109/CSO.2011.185
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Title	On infectious models for dependent default risk
Authors	Gu, J1 Ching, WK1 Siu, TK2
Keywords	Chain reaction of infectious defaults Common shock Default risk Markov chains One-sector model Two-sector model
Issue Date	2011
Publisher	IEEE Computer Society. The Journal's web site is located at http://ieeexplore.ieee.org/xpl/conhome.jsp?punumber=1002829
Citation	The 4th International Joint Conference on Computational Sciences and Optimization (CSO 2011), Yunnan, China, 15-19 April 2011. In Proceedings of the 4th CSO, 2011, p. 1196-1200 [How to Cite?] DOI: http://dx.doi.org/10.1109/CSO.2011.185
Abstract	Modeling dependent defaults is a key issue in risk measurement and management. In this paper, we introduce a Markovian infectious model to describe the dependent relationship of default processes of credit entities. The key idea of the proposed model is based on the concept of common shocks adopted in the insurance industry. We compare the proposed model to both one-sector and two-sector models considered in the credit literature using real default data. A log-likelihood ratio test is applied to compare the goodness-of- fit of the proposed model. Our empirical results reveal that the proposed model outperforms both the one-sector and two-sector models. © 2011 IEEE.
ISBN	978-0-7695-4335-2
DOI	http://dx.doi.org/10.1109/CSO.2011.185
References	References in Scopus

DC Field	Value
dc.contributor.author	Gu, J
dc.contributor.author	Ching, WK
dc.contributor.author	Siu, TK
dc.date.accessioned	2011-10-28T02:56:23Z
dc.date.available	2011-10-28T02:56:23Z
dc.date.issued	2011
dc.description.abstract	Modeling dependent defaults is a key issue in risk measurement and management. In this paper, we introduce a Markovian infectious model to describe the dependent relationship of default processes of credit entities. The key idea of the proposed model is based on the concept of common shocks adopted in the insurance industry. We compare the proposed model to both one-sector and two-sector models considered in the credit literature using real default data. A log-likelihood ratio test is applied to compare the goodness-of- fit of the proposed model. Our empirical results reveal that the proposed model outperforms both the one-sector and two-sector models. © 2011 IEEE.
dc.description.nature	published_or_final_version
dc.description.other	The 4th International Joint Conference on Computational Sciences and Optimization (CSO 2011), Yunnan, China, 15-19 April 2011. In Proceedings of the 4th CSO, 2011, p. 1196-1200
dc.identifier.citation	The 4th International Joint Conference on Computational Sciences and Optimization (CSO 2011), Yunnan, China, 15-19 April 2011. In Proceedings of the 4th CSO, 2011, p. 1196-1200 [How to Cite?] DOI: http://dx.doi.org/10.1109/CSO.2011.185
dc.identifier.doi	http://dx.doi.org/10.1109/CSO.2011.185
dc.identifier.epage	1200
dc.identifier.hkuros	184625
dc.identifier.isbn	978-0-7695-4335-2
dc.identifier.scopus	eid_2-s2.0-80052006093
dc.identifier.spage	1196
dc.identifier.uri	http://hdl.handle.net/10722/142832
dc.language	eng
dc.publisher	IEEE Computer Society. The Journal's web site is located at http://ieeexplore.ieee.org/xpl/conhome.jsp?punumber=1002829
dc.relation.ispartof	Proceedings of the International Joint Conference on Computational Sciences and Optimization, CSO 2011
dc.relation.references	References in Scopus
dc.rights	Creative Commons: Attribution 3.0 Hong Kong License
dc.rights	Proceedings of the International Joint Conference on Computational Sciences and Optimization. Copyright © IEEE Computer Society.
dc.rights	©2011 IEEE. Personal use of this material is permitted. However, permission to reprint/republish this material for advertising or promotional purposes or for creating new collective works for resale or redistribution to servers or lists, or to reuse any copyrighted component of this work in other works must be obtained from the IEEE.
dc.subject	Chain reaction of infectious defaults
dc.subject	Common shock
dc.subject	Default risk
dc.subject	Markov chains
dc.subject	One-sector model
dc.subject	Two-sector model
dc.title	On infectious models for dependent default risk
dc.type	Conference_Paper

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Author Affiliations

The University of Hong Kong
Macquarie University