REINFORCED URN PROCESSES FOR MODELING CREDIT DEFAULT DISTRIBUTIONS

Emanuele Amerio (), Pietro Muliere and Piercesare Secchi
Additional contact information
Emanuele Amerio: INSEAD & Università Bocconi, IMQ, V.le Isonzo 25, Milano 20135, Italy
Pietro Muliere: Università Bocconi and Politecnico di Milano, Italy
Piercesare Secchi: Università Bocconi and Politecnico di Milano, Italy

International Journal of Theoretical and Applied Finance (IJTAF), 2004, vol. 07, issue 04, 407-423

Abstract: Based on a Reinforced Urn Process introduced by Muliereet al.[11], we propose a stochastic model for the probability of credit default for debt issuers belonging to the same Moody's rated class. The model predicts how a default probability belonging to a given term structure evolves in time as information about credit defaults of debt issuers with the same Moody's rating becomes available. Connections between implied credit default probabilities and credit spreads will be exploited.

Keywords: Default probability; credit spreads; Polya urn schemes; Dirichlet process; Beta–Stacy process; JEL classification code C11; JEL classification code G33; 62C10; 62G99; 60G09 (search for similar items in EconPapers)
Date: 2004
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024904002505
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:07:y:2004:i:04:n:s0219024904002505

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219024904002505

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().