Frailty Correlated Default

Darrell Duffie, Andreas Eckner, Guillaume Horel and Leandro Saita
Additional contact information
Andreas Eckner: Stanford University
Guillaume Horel: Stanford University
Leandro Saita: Lehman Brothers

No 08-44, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We analyze portfolio credit risk in light of dynamic “frailty,” by which the credit qualities of different firms depend on common unobservable time-varying default covariates. Frailty is estimated to have a large impact on estimated conditional mean default rates, above and beyond those predicted by observable factors, and to cause a large increase in the likelihood of large default losses for portfolios of U.S. corporate bonds during 1980-2004.

Keywords: correlated default; doubly stochastic; frailty; latent factor. (search for similar items in EconPapers)
JEL-codes: C11 C15 C41 E44 G33 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2008-12
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Frailty Correlated Default (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp0844

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