Fluctuation Analysis for the Loss From Default

Konstantinos Spiliopoulos, Justin A. Sirignano and Kay Giesecke

Papers from arXiv.org

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.

Date: 2013-04, Revised 2015-02
New Economics Papers: this item is included in nep-cwa and nep-rmg
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Published in Stochastic Processes and their Applications, Volume 124, Issue 7, 2014, pp. 2322-2362

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1304.1420

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