A Non-Homogeneous Semi-Markov Reward Model for the Credit Spread Computation

D’Amico, Guglielmo; Janssen, Jacques; Manca, Raimondo

doi:10.1142/s0219024911006346

Cited by 10 publications

(5 citation statements)

References 18 publications

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“…Assumption 3 arises from the recognition about the influence of the rating dynamics on the credit spread evolution, which has been already pointed out in other works focusing on corporate bonds (Huang and Huang, 2012;D'Amico et al, 2011). This influence has been introduced in the model by the assumption of a common spread distribution for countries with the same rating assignment.…”

Section: Assumptionmentioning

confidence: 98%

On the Sensitivity of a Dynamic Measure of Financial Inequality

D’Amico¹,

Scocchera²,

Storchi³

2019

Journal of Mathematics and Statistics

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In the present work, we investigate the sensitivity of the dynamic Theil index computed under a Markov reward model with respect to structured perturbations affecting the underlying Markov process. The model is applied to the sovereign credit spread evolution as a proxy for financial risk, which are driven by the sovereign credit rating dynamic. The introduction of such perturbations allows to evaluate the sensitivity of the inequality of the financial risk in a given group of financial entities with respect to the uncertainty in the rating dynamics. To this end we perform a simulation based sensitivity analysis. The methodology is applied to real data concerning sovereign credit ratings and long-term interest rates on government bonds of 24 European countries. Obtained results suggest different sensitivity of the inequality measure to the 12 scenarios built supposing different ways the perturbations could affect the rating process.

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Section: Assumptionmentioning

confidence: 98%

On the Sensitivity of a Dynamic Measure of Financial Inequality

D’Amico¹,

Scocchera²,

Storchi³

2019

Journal of Mathematics and Statistics

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“…The task that faces the technology for investment potential management is to eliminate the existing contradictions and to create a model of the investment potential management process based on a unified approach [11][12][13][14][15][16][17][18].…”

Section: Introductionmentioning

confidence: 99%

Methodological Approach to Assessing the Effectiveness of Managing the Investment Potential of International Financial Corporations

Chernogorskiy¹,

Kostin²,

Mühlfriedel³

2021

Preprint

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Assessing the management of the investment potential of international financial corporations is an important research problem, since it helps to substantiate the significance of decisions made, which increases the efficiency of international corporations in general. One of the main indicators that evaluate the quality of enterprise management is operational efficiency. The effectiveness of the enterprise means the ability of the enterprise to ensure the constant production of material (information, social, etc., depending on the segment of the enterprise) goods, in any given situation. This article touches upon the issue of assessing the effectiveness of managing the investment potential of an enterprise. The general approach to the methodology is based on a model of making a personal decision based on synthesis, while a personal decision is being the basis of any activity, regardless of the sphere of management. The article uses a methodology for assessing the effectiveness, based on the construction of a complex system. The methodology is also stipulated by: firstly, the basic laws of the subject area (basic physical, social and technical laws), and secondly, the ultimate goal of the system development. This approach is based on the system integration of the basic processes for managing the investment potential of the enterprise and represents a solution to the inverse management problem. This synthesis-based approach ensures the achievement of the goal of management. Within the process of development of the approach to assessing the effectiveness of managing the investment potential of an enterprise, a synthesis-based mathematical model was developed.

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“…The main determinant of the credit spread evolution is the credit rating, the latter summarizes the creditworthiness of a given country. The assumption about the relationship between ratings and credit spread has been investigated in the financial literature mainly concerning corporate bonds (see e.g., Huan and Huan (2012) and D'Amico et al (2011)).…”

Section: Introductionmentioning

confidence: 99%

A Continuous-Time Inequality Measure Applied to Financial Risk: The Case of the European Union

D’Amico

Regnault

Scocchera

et al. 2018

IJFS

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In this paper, we apply information theory measures and Markov processes in order to analyse the inequality in the distribution of the financial risk in a pool of countries. The considered financial variables are sovereign credit ratings and interest rates of sovereign government bonds of European countries. This paper extends the methodology proposed in our previous work, by allowing the possibility to consider a continuous time process for the credit rating evolution so that complete observations of rating histories and credit spreads can be considered in the analysis. Obtained results suggest that the continuous time model fits real data better than the discrete one and confirm the existence of a different risk perception among the three main rating agencies: Fitch, Moody's and Standard & Poor's. The application of the model has been performed by a software we developed, the full code is available on-line allowing the replication of all results.

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A Non-Homogeneous Semi-Markov Reward Model for the Credit Spread Computation

Cited by 10 publications

References 18 publications

On the Sensitivity of a Dynamic Measure of Financial Inequality

On the Sensitivity of a Dynamic Measure of Financial Inequality

Methodological Approach to Assessing the Effectiveness of Managing the Investment Potential of International Financial Corporations

A Continuous-Time Inequality Measure Applied to Financial Risk: The Case of the European Union

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