A statistical modeling methodology for the analysis of term structure of credit risk and its dependency

Jiashen You, Tomohiro Ando

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This paper presents a statistical modeling methodology for simultaneous estimation of the term structure for the risk-free interest rate, hazard rate, loss given default as well as credit risk dependency structure between bond-issuing industries. Amodel like this provides a realistic view for the market anticipation of credit risk for corporate bonds and the flexibility in capturing credit risk dependency between industries. Our statistical modeling procedure is carried out without specifying the model likelihood explicitly, and thus robust to the model mis-specification. An empirical analysis is conducted using the financial infor- mation on the Japanese bond market data. Numerical results confirm the practicality of the proposed methodology.

Original languageEnglish
Pages (from-to)4897-4905
Number of pages9
JournalExpert Systems with Applications
Volume40
Issue number12
DOIs
Publication statusPublished - 2013
Externally publishedYes

    Fingerprint

Keywords

  • Corporate bond pricing
  • Credit risk dependency
  • Default probability
  • Loss given default

ASJC Scopus subject areas

  • Artificial Intelligence
  • Computer Science Applications
  • Engineering(all)

Cite this