Beta Binomial Distribution with Temporal Correlation

Masato Hisakado
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Masato Hisakado: Nomura Hodings, Inc.

Chapter Chapter 10 in Urn Models and Their Applications in Finance, 2025, pp 155-169 from Springer

Abstract: Abstract Estimations of the probability of default (PD) and default correlation have been obtained from empirical studies on historical data from credit events. These two parameters are important for pricing financial products, such as synthetic Collateralized Debt Obligation (CDO) (Schönbucher 2003). Also called “long run PDs”, these parameters are important to financial institutions for portfolio management and risk management. If the number of defaults is minimal, it is not easy to estimate these parameters (Pluto and Tasche 2011; Benjamin et al. 2001).

Date: 2025
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DOI: 10.1007/978-981-96-3825-3_10

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