Artikel
Credit risk meets random matrices: Coping with non-stationary asset correlations
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 maturity. To estimate the time development of the asset values, the stock prices are used, the correlations of which have a strong impact on the loss distribution, particularly on its tails. These correlations are non-stationary, which also influences the tails. We account for the asset fluctuations by averaging over an ensemble of random matrices that models the truly existing set of measured correlation matrices. As a most welcome side effect, this approach drastically reduces the parameter dependence of the loss distribution, allowing us to obtain very explicit results, which show quantitatively that the heavy tails prevail over diversification benefits even for small correlations. We calibrate our random matrix model with market data and show how it is capable of grasping different market situations. Furthermore, we present numerical simulations for concurrent portfolio risks, i.e., for the joint probability densities of losses for two portfolios. For the convenience of the reader, we give an introduction to the Wishart random matrix model.
- Sprache
-
Englisch
- Erschienen in
-
Journal: Risks ; ISSN: 2227-9091 ; Volume: 6 ; Year: 2018 ; Issue: 2 ; Pages: 1-25 ; Basel: MDPI
- Klassifikation
-
Wirtschaft
- Thema
-
credit risk
financial markets
non-stationarity
random matrices
structural models
Wishart model
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Mühlbacher, Andreas
Guhr, Thomas
- Ereignis
-
Veröffentlichung
- (wer)
-
MDPI
- (wo)
-
Basel
- (wann)
-
2018
- DOI
-
doi:10.3390/risks6020042
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:45 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Artikel
Beteiligte
- Mühlbacher, Andreas
- Guhr, Thomas
- MDPI
Entstanden
- 2018
Ähnliche Objekte (12)
Non-stationary Wave Turbulence
Active visual search in non-stationary scenes: coping with temporal variability and uncertainty
Learning in non-stationary Environments
Non-stationary optical homodyne tomography
Bootstrapping Non-Stationary Stochastic Volatility
Stationary Subspace Analysis: Towards understanding non-stationary data
Sequence prediction for non-stationary processes
Contributions to non-stationary sediment transport
Non-stationary stochastic processes estimation : vector stationary increments, periodically stationary multi-seasonal increments
Reconstructing the intensity of non-stationary poisson
Spurious relationships for nearly non-stationary series
Nonparametric rank tests for non-stationary panels
Non-stationary Wave Turbulence
Active visual search in non-stationary scenes: coping with temporal variability and uncertainty
Learning in non-stationary Environments
Non-stationary optical homodyne tomography
Bootstrapping Non-Stationary Stochastic Volatility
Stationary Subspace Analysis: Towards understanding non-stationary data
Sequence prediction for non-stationary processes
Contributions to non-stationary sediment transport
Non-stationary stochastic processes estimation : vector stationary increments, periodically stationary multi-seasonal increments
Reconstructing the intensity of non-stationary poisson
Spurious relationships for nearly non-stationary series
Nonparametric rank tests for non-stationary panels
Non-stationary Wave Turbulence
Active visual search in non-stationary scenes: coping with temporal variability and uncertainty
Learning in non-stationary Environments
Non-stationary optical homodyne tomography
Bootstrapping Non-Stationary Stochastic Volatility
Stationary Subspace Analysis: Towards understanding non-stationary data
Sequence prediction for non-stationary processes
Contributions to non-stationary sediment transport
Non-stationary stochastic processes estimation : vector stationary increments, periodically stationary multi-seasonal increments
Reconstructing the intensity of non-stationary poisson
Spurious relationships for nearly non-stationary series