A Markovian network model for default risk management | Macquarie University ResearchOnline

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Title: A Markovian network model for default risk management
Related: International journal of intelligent engineering informatics, Vol. 1, Issue 1, (2010), p.104-124
DOI: 10.1504/IJIEI.2010.033532
Publisher: Inderscience Publishers
Date: 2010
Author/Creator: Ching, Wai-Ki
Author/Creator: Leung, Ho-Yin
Author/Creator: Jiang, Hao
Author/Creator: Sun, Liang
Author/Creator: Siu, Tak-Kuen
Description: In this paper, we study the problem of modelling the dependence of defaults in several sectors. We consider a network-based model for the default data sequences and model the sequences by a Markov chain model. The new model provides a flexible paradigm for portfolio credit risk assessment. We evaluate two important risk measures, namely, crisis value-at-risk (CRVaR) and crisis expected shortfall (CRES). Numerical experiments are given to illustrate the practical implementation of the model. We also perform empirical studies of the model using real default data and analyse the empirical behaviours of the risk measures arising from the model.
Description: 21 page(s)
Subject Keyword: value-at-risk
Subject Keyword: VaR
Subject Keyword: expected shortfall
Subject Keyword: ES
Subject Keyword: Markov chain model
Subject Keyword: defaults
Subject Keyword: network of sectors
Subject Keyword: risk management
Resource Type: journal article
Organisation: Macquarie University. Dept. of Applied Finance and Actuarial Studies

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