Default clustering in large portfolios: Typical events

Kay Giesecke, Konstantinos Spiliopoulos and Richard B. Sowers

Papers from arXiv.org

Abstract: We develop a dynamic point process model of correlated default timing in a portfolio of firms, and analyze typical default profiles in the limit as the size of the pool grows. In our model, a firm defaults at a stochastic intensity that is influenced by an idiosyncratic risk process, a systematic risk process common to all firms, and past defaults. We prove a law of large numbers for the default rate in the pool, which describes the "typical" behavior of defaults.

Date: 2011-04, Revised 2013-02
New Economics Papers: this item is included in nep-rmg
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Published in Annals of Applied Probability 2013, Vol. 23, No. 1, 348-385

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1104.1773

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