The evolution of prices in market is usually given by geometric Brownian motion, where the Brownian process describes fluctuations is often called "white" noise. We study the effect of correlations introduced by a "colored" noise. We demonstrate how the "color" Brownian process may capture the...

This volume was written in honor of Wendell H. Fleming, a mathematician who has made fundamental contributions in the fields of calculus of variations, geometric measure theory, differential games, stochastic control theory, and population genetics. This book includes authoritative expositions...

The stressed probability of default and rating migration are important for the banks to assess the adequacy of credit reserve and credit capital under the stress market condition. Credit reserves are designed to cover the expected loss which can be estimated by the through-the-cycle probability...

The estimation of future loan losses is not only important for financial institutions to effectively control the credit risk of commercial loan portfolio, but also an essential component in the capital plan submitted for regulatory approval in the annual CCAR and DFAST stress testing. Under the...

Michael Pykhtin and Steven Zhu offer a blueprint for modelling credit exposure and pricing counter-party risk. They focus on two main issues: modelling credit exposure and pricing counter-party risk. In the part devoted to credit exposure, we will define credit exposure at contract and...

Credit exposure is the amount a bank can potentially lose in the event that one of its counterparties default. The measurement of exposure on derivative contracts is very important because it is used not only to set up the trading limits but also as an essential input to the bank's economic and...

Credit exposure is the amount a bank can potentially lose in the event that one of its counterparties default. The measurement of exposure on derivative contracts is very important because it is used not only to set up the trading limits but also as an essential input to the bank's economic and...