Credit risk is one of the main risks financial institutions are exposed to. Within the last two decades, simulation-based credit portfolio models became extremely popular and replaced closed-form analytical ones as computers became more powerful. However, especially for non-homogenous and...

We introduce a new skewed and leptokurtic distribution derived from the hyperbolic secant distribution and Johnson's S transformation. Properties of this new distribution are given. Finally, we empirically demonstrate in the context of financial return data that its exibility is comparable to...

Measuring interdependence between probabilities of default (PDs) in different industry sectors of an economy plays a crucial role in financial stress testing. Thereby, regression approaches may be employed to model the impact of stressed industry sectors as covariates on other response sectors....

In this paper, we demonstrate the superiority of vine copulas over conventional copulas when modeling the dependence structure of a credit portfolio. We show statistical and economic implications of replacing conventional copulas by vine copulas for a subportfolio of the Euro Stoxx 50 and the...