Default Probability Estimation via Pair Copula Constructions

Luciana Dalla Valle, Maria Elena De Giuli (), Claudio Manelli () and Claudia Tarantola ()
Additional contact information
Maria Elena De Giuli: Department of Economics and Management, University of Pavia
Claudio Manelli: List S.p.A
Claudia Tarantola: Department of Economics and Management, University of Pavia

No 48, DEM Working Papers Series from University of Pavia, Department of Economics and Management

Abstract: In this paper we present a novel Bayesian approach for default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula theory. Balance sheet data are used to asses the firm value and to compute its default probability. The firm pricing function is obtained via a pair copula approach, and Monte Carlo simulations are used to calculate the default probability distribution. The methodology is illustrated through an application to defaulted firms data.

Keywords: Bayesian analysis; Pair Copula; Default Risk; Multivariate Contingent Claim; Markov Chain Monte Carlo; Vines. (search for similar items in EconPapers)
JEL-codes: E02 H63 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2013-07
New Economics Papers: this item is included in nep-ecm and nep-rmg
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http://dem-web.unipv.it/web/docs/dipeco/quad/ps/RePEc/pav/demwpp/DEMWP0048.pdf (application/pdf)

Related works:
Journal Article: Default probability estimation via pair copula constructions (2016)
Working Paper: Default Probability Estimation via Pair Copula Constructions (2015)
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