Recent financial crises and especially large corporate bankruptcies, have led bank managements and financial authorities to follow and monitor both financial and real sector risks, and to focus on firm failures. Bank of International Settlements, has therefore, taken the decision to include the...

The paper presents a new methodology, based on tensor decomposition, to map dynamic trade networks and to assess their strength on spreading economic fluctuations at different periods of time in Asia. Using the monthly merchandise import and export data across 33 Asian economies, together with...

Absence-of-Arbitrage (AoA) is the basic assumption underpinning derivatives pricing theory. As part of the OTC derivatives market, the CDS market not only provides a vehicle for participants to hedge and speculate on the default risks of corporate and sovereign entities, it also reveals...

The paper presents a new methodology, based on tensor decomposition, to map dynamic trade networks and to assess their strength on spreading economic fluctuations at different periods of time in Asia. Using the monthly merchandise import and export data across 33 Asian economies, together with...

We propose a distress measure for national banking systems that incorporates not only banks' CDS spreads, but also how they interact with the rest of the global financial system via multiple linkage types. The measure is based on a tensor decomposition method that extracts an adjacency matrix...

We propose a distress measure for national banking systems that incorporates not only banks' CDS spreads, but also how they interact with the rest of the global financial system via multiple linkage types. The measure is based on a tensor decomposition method that extracts an adjacency matrix...

Regulators require financial institutions to estimate counterparty default risks from liquid CDS quotes for the valuation and risk management of OTC derivatives. However, the vast majority of counterparties do not have liquid CDS quotes and need proxy CDS rates. Existing methods cannot account...

Common ordinal models, including the ordered logit model and the continuation ratio model, are structured by a common score (i.e., a linear combination of a list of given explanatory variables) plus rank specific intercepts. Sensitivity with respect to the common score is generally not...

This paper proposes a new approach to estimate general stationary diffusion processes that describe the evolution of unobserved arrival rates of credit events on sovereign bonds, allowing for arbitrary parametric drift and diffusion specifications. The solutions and transition processes for...

Monotonic estimation for the survival probability of a loan in a risk-rated portfolio is based on the observation arising, for example, from loan pricing that a loan with a lower credit risk rating is more likely to survive than a loan with a higher credit risk rating, given the same additional...