The paper proposes an application of the survival time analysis methodology to estimations of the Loss Given Default (LGD) parameter. The main advantage of the survival analysis approach compared to classical regression methods is that it allows exploiting partial recovery data. The model is...

Under the new Basel III banking regulation banks should include wrong-way risk (WWR) into the calculation of the credit valuation adjustment (CVA) of the OTC derivatives. WWR takes place when the exposure to a counterparty is adversely correlated with the credit quality of that counterparty....

Quantitative investment strategies are often selected from a broad class of candidate models estimated and tested on historical data. Standard statistical technique to prevent model overfitting such as out-sample back-testing turns out to be unreliable in the situation when selection is based on...