TY - JOUR
T1 - A statistical modeling methodology for the analysis of term structure of credit risk and its dependency
AU - You, Jiashen
AU - Ando, Tomohiro
N1 - Funding Information:
The authors are particularly grateful to Prof. Yingnian Wu (UCLA) for helpful suggestions. This study is partially supported by Nomura Foundation, Japan .
PY - 2013
Y1 - 2013
N2 - 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.
AB - 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.
KW - Corporate bond pricing
KW - Credit risk dependency
KW - Default probability
KW - Loss given default
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U2 - 10.1016/j.eswa.2013.02.017
DO - 10.1016/j.eswa.2013.02.017
M3 - Article
AN - SCOPUS:84885085914
SN - 0957-4174
VL - 40
SP - 4897
EP - 4905
JO - Expert Systems with Applications
JF - Expert Systems with Applications
IS - 12
ER -