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February 2013 Default clustering in large portfolios: Typical events
Kay Giesecke, Konstantinos Spiliopoulos, Richard B. Sowers
Ann. Appl. Probab. 23(1): 348-385 (February 2013). DOI: 10.1214/12-AAP845

Abstract

We develop a dynamic point process model of correlated default timing in a portfolio of firms, and analyze typical default profiles in the limit as the size of the pool grows. In our model, a firm defaults at a stochastic intensity that is influenced by an idiosyncratic risk process, a systematic risk process common to all firms, and past defaults. We prove a law of large numbers for the default rate in the pool, which describes the “typical” behavior of defaults.

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Kay Giesecke. Konstantinos Spiliopoulos. Richard B. Sowers. "Default clustering in large portfolios: Typical events." Ann. Appl. Probab. 23 (1) 348 - 385, February 2013. https://doi.org/10.1214/12-AAP845

Information

Published: February 2013
First available in Project Euclid: 25 January 2013

zbMATH: 1262.91141
MathSciNet: MR3059238
Digital Object Identifier: 10.1214/12-AAP845

Subjects:
Primary: 60G55 , 60G57 , 60H10 , 91680 , 91G40

Keywords: contagion , Interacting point processes , Law of Large Numbers , portfolio credit risk

Rights: Copyright © 2013 Institute of Mathematical Statistics

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Vol.23 • No. 1 • February 2013
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