Fluctuation analysis for the loss from default
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Publication:402480
DOI10.1016/J.SPA.2014.02.010zbMATH Open1333.60035arXiv1304.1420OpenAlexW3122456883MaRDI QIDQ402480FDOQ402480
Authors: Justin A. Sirignano, Kay Giesecke, Konstantinos Spiliopoulos 
Publication date: 28 August 2014
Published in: Stochastic Processes and their Applications (Search for Journal in Brave)
Abstract: We analyze the fluctuation of the loss from default around its large portfolio limit in a class of reduced-form models of correlated firm-by-firm default timing. We prove a weak convergence result for the fluctuation process and use it for developing a conditionally Gaussian approximation to the loss distribution. Numerical results illustrate the accuracy and computational efficiency of the approximation.
Full work available at URL: https://arxiv.org/abs/1304.1420
Recommendations
Central limit and other weak theorems (60F05) Interacting random processes; statistical mechanics type models; percolation theory (60K35) Portfolio theory (91G10) Credit risk (91G40) Financial applications of other theories (91G80)
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Cited In (22)
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- Systemic risk and default clustering for large financial systems
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- A dynamic network model of interbank lending -- systemic risk and liquidity provisioning
- Affine point processes: approximation and efficient simulation
- Default clustering in large pools: large deviations
- Stochastic evolution equations for large portfolios of stochastic volatility models
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