A contagion process with self-exciting jumps in credit risk applications
Puneet Pasricha,
Dharmaraja Selvamuthu,
Selvaraju Natarajan
Abstract:The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and hence play a significant role in allocating capital for solvency purposes. In this article, we derive a closed-form expression for the probability of default of a single firm and the probability of the total number of defaults by any time t in a homogeneous portfolio of firm… Show more
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