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 sig ...
This thesis consists of three applications of machine learning techniques to risk management. The first chapter proposes a deep learning approach to estimate physical forward default intensities of companies. Default probabilities are computed using artifi ...
This thesis examines how banks choose their optimal capital structure and cash reserves in the presence of regulatory measures.The first chapter, titled Bank Capital Structure and Tail Risk, presents a bank capital structure model in which bank assets ...
The COVID-19 pandemic has demonstrated the importance and value of multi-period asset allocation strategies responding to rapid changes in market behavior. In this article, we formulate and solve a multi-stage stochastic optimization problem, choosing the ...
We challenge the view that short-term debt curbs moral hazard and demonstrate that, in a world with financing frictions and fair debt pricing, short-term debt generates incentives for risk-taking. To do so, we develop a model in which firms are financed wi ...
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors. The price of a CDS ...
Governments choose to issue risky or riskless debt depending on the nature of the stochastic process of output. We use Brownian motion and Poisson shocks a modeling method in the literature on corporate default known as Levy processes to approximate a deco ...
We investigate the cross-sectional variation in the credit default swap (CDS)-bond bases and test explanations for the violation of the arbitrage relation between cash bond and CDS contract, which states that the basis should be zero in normal conditions. ...
This thesis develops three models that study the motivation of various agents to take on debt,
and the impact that excessive financial leverage can have on social welfare.
In the chapter "Short-term Bank Leverage and the Value of Liquid Reserves", the ince ...
This thesis presents new flexible dynamic stochastic models for the evolution of market prices and new methods for the valuation of derivatives. These models and methods build on the recently characterized class of polynomial jump-diffusion processes for w ...
