On distributions with fixed marginals maximizing the joint or the prior default probability, estimation, and related results

DOI10.1016/J.JSPI.2022.07.005zbMATH Open1501.60015arXiv1602.05807OpenAlexW3204546782MaRDI QIDQ2095101FDOQ2095101

Authors: Thomas A. Mroz, Sebastian Fuchs, Wolfgang Trutschnig, Juan Fernández-Sánchez 

Publication date: 9 November 2022

Published in: Journal of Statistical Planning and Inference (Search for Journal in Brave)

Abstract: We study the problem of maximizing the probability that (i) an electric component or financial institution $X$ does not default before another component or institution $Y$ and (ii) that $X$ and $Y$ default jointly within the class of all random variables $X,Y$ with given univariate continuous distribution functions $F$ and $G$, respectively, and show that the maximization problems correspond to finding copulas maximizing the mass of the endograph $Gamm{a}^{l}eq(T)$ and the graph $Gamma(T)$ of $T=Gcirc{F}^{-}$, respectively. After providing simple, copula-based proofs for the existence of copulas attaining the two maxima $overline{m}_T$ and $overline{w}_T$ we generalize the obtained results to the case of general (not necessarily monotonic) transformations $T:[0,1]ightarrow[0,1]$ and derive simple and easily calculable formulas for $overline{m}_T$ and $overline{w}_T$ involving the distribution function $F_T$ of $T$ (interpreted as random variable on $[0,1]$). The latter are then used to charac-terize all non-decreasing transformations $T:[0,1]ightarrow[0,1]$ for which $overline{m}_T$ and $overline{w}_T$ coincide. A strongly consistent estimator for the maximum probability that $X$ does not default before $Y$ is derived and proven to be asymptotically normal under very mild regularity conditions. Several examples and graphics illustrate the main results and falsify some seemingly natural conjectures.

Full work available at URL: https://arxiv.org/abs/1602.05807

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zbMATH Keywords

copulagraphdependenceestimatorendographMarkov kernel

Mathematics Subject Classification ID

Probability distributions: general theory (60E05) Statistical methods; risk measures (91G70) Integration and disintegration of measures (28A50)

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