Quality control for structural credit risk models
Date
2008Author
Andreou, ElenaGhysels, Eric
Source
Journal of EconometricsVolume
146Pages
364-375Google Scholar check
Keyword(s):
Metadata
Show full item recordAbstract
Over the last four decades, a large number of structural models have been developed to estimate and price credit risk. The focus of the paper is on a neglected issue pertaining to fundamental shifts in the structural parameters governing default. We propose formal quality control procedures that allow risk managers to monitor fundamental shifts in the structural parameters of credit risk models. The procedures are sequential - hence apply in real time. The basic ingredients are the key processes used in credit risk analysis, such as most prominently the Merton distance to default process as well as financial returns. Moreover, while we propose different monitoring processes, we also show that one particular process is optimal in terms of minimal detection time of a break in the drift process and relates to the Radon-Nikodym derivative for a change of measure. © 2008 Elsevier B.V. All rights reserved.
Collections
Cite as
Related items
Showing items related by title, author, creator and subject.
-
Article
The Impact of Interactive Computer Simulations on the Nature and Quality of Postgraduate Science Teachers' Explanations in Physics
Zacharia, Zacharias C. (International Journal of Science Education, 2005)This study investigated how individuals' construction of explanations--a way of ascertaining how well an individual understands a concept--develops from an interactive simulation. Specifically, the purpose was to investigate ...
-
Article
Ab-initio electronic structure calculations and properties of [SixSn1 − x]3N4 ternary nitrides
Pavloudis, T.; Zervos, Matthew; Komninou, P.; Kioseoglou, J. (2016)We carry out ab initio electronic structure calculations of (SixSn1 − x)3N4 using density functional theory with projector augmented-wave potentials under the generalized gradient approximation. We find that the energetically ...
-
Article
The 1.76 Å resolution crystal structure of glycogen phosphorylase b complexed with glucose, and CP320626, a potential antidiabetic drug
Oikonomakos, Nikos G.; Zographos, Spyros E.; Skamnaki, Vicky T.; Archontis, Georgios Z. (2002)CP320626, a potential antidiabetic drug, inhibits glycogen phosphorylase in synergism with glucose. To elucidate the structural basis of synergistic inhibition, we determined the structure of muscle glycogen phosphorylase ...