Point processes with stochastic intensities are ubiquitous in many application areas, including finance, insurance, reliability and queuing. They can be simulated from standard Poisson arrivals by time-scaling with the cumulative intensity, whose path is typically generated with a discretization...

Credit risk is the distribution of financial losses due to unexpected changes in the credit quality of a counterparty in a financial agreement. We review the structural, reduced form and incomplete information approaches to estimating joint default probabilities and prices of credit sensitive...

We model aggregate credit losses on large portfolios of financial positions contracted with firms subject to both cyclical default correlation and direct default contagion processes. Cyclical correlation is due to the dependence of firms on common economic factors. Credit contagion phenomena are...

The recent accounting scandals at Enron, WorldCom, and Tyco wererelated to the (intentional) non-disclosure of a part of the firm's liabilities. We provide a structural model of correlated multi-firm default, in which public bond investors are uncertain about the liability-dependent barrier at...

Credit contagion refers to the propagation of economic distress from one firm to another. This article proposes a reduced-form model for these contagion phenomena, assuming they are due to the local interaction of firms in a business partner network. We study aggregate credit losses on large...

We model aggregate credit losses on large portfolios of financial positions contracted with firms subject to both cyclical default correlation and direct default contagion processes. Cyclical correlation is due to the dependence of firms on common economic factors. Credit contagion phenomena are...

The recent accounting scandals at Enron, WorldCom, and Tyco were related to the (intentional) non-disclosure of a part of the firm's liabilities. We provide a structural model of correlated multi-firm default, in which public bond investors are uncertain about the liability-dependent barrier at...

In a traditional structural model of default it is implicitly assumed that the information used to calibrate and run the model is publicly available. In reality, model inputs and parameters are unobservable. In this article we analyze the role of information in structural models, which we...

A thorough understanding of the joint default behavior of credit-risky securities is essential for credit risk measurement as well as the valuation of multi-name credit derivatives and Collateralized Debt Obligations. In this paper we study a simple and tractable intensity-based model for...

Using data on corporate default experience in the U.S. and market rates of CDX index and tranche swaps of various maturities, we estimate reduced-form models of correlated default timing in the CDX High Yield and Investment Grade portfolios under actual and risk-neutral probabilities. The...