Showing 1 - 10 of 36
We review recent progress in modeling credit risk for correlated assets. We employ a new interpretation of the Wishart model for random correlation matrices to model non-stationary effects. We then use the Merton model in which default events and losses are derived from the asset values at...
Persistent link: https://www.econbiz.de/10011996600
The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence, it is of utmost importance to study the mutual dependence of losses for different creditors in the case of large, overlapping credit portfolios. We...
Persistent link: https://www.econbiz.de/10011996630
Financial correlation matrices measure the unsystematic correlations between stocks. Such information is important for risk management. The correlation matrices are known to be ``noise dressed''. We develop a new and alternative method to estimate this noise. To this end, we simulate certain...
Persistent link: https://www.econbiz.de/10005083469
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations between the companies. We discuss that models of this...
Persistent link: https://www.econbiz.de/10005083784
We demonstrate that the lowest possible price change (tick-size) has a large impact on the structure of financial return distributions. It induces a microstructure as well as it can alter the tail behavior. On small return intervals, the tick-size can distort the calculation of correlations....
Persistent link: https://www.econbiz.de/10008526774
The understanding of complex systems has become a central issue because complex systems exist in a wide range of scientific disciplines. Time series are typical experimental results we have about complex systems. In the analysis of such time series, stationary situations have been extensively...
Persistent link: https://www.econbiz.de/10009492890
We present a method to compensate statistical errors in the calculation of correlations on asynchronous time series. The method is based on the assumption of an underlying time series. We set up a model and apply it to financial data to examine the decrease of calculated correlations towards...
Persistent link: https://www.econbiz.de/10008568586
We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. This ensemble is set up by Random Matrix Theory. We demonstrate analytically that the presence of correlations severely limits the effect of diversification in a...
Persistent link: https://www.econbiz.de/10008839375
We present two statistical causes for the distortion of correlations on high-frequency financial data. We demonstrate that the asynchrony of trades as well as the decimalization of stock prices has a large impact on the decline of the correlation coefficients towards smaller return intervals...
Persistent link: https://www.econbiz.de/10008678713
We identify and analyze statistical regularities and irregularities in the recent order flow of different NASDAQ stocks, focusing on the positions where orders are placed in the orderbook. This includes limit orders being placed outside of the spread, inside the spread and (effective) market...
Persistent link: https://www.econbiz.de/10012963070