Measuring Corporate Default Risk

Business & Finance, Finance & Investing, Finance, Investments & Securities
Cover of the book Measuring Corporate Default Risk by Darrell Duffie, OUP Oxford
View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart
Author: Darrell Duffie ISBN: 9780191500473
Publisher: OUP Oxford Publication: June 23, 2011
Imprint: OUP Oxford Language: English
Author: Darrell Duffie
ISBN: 9780191500473
Publisher: OUP Oxford
Publication: June 23, 2011
Imprint: OUP Oxford
Language: English

This book, based on the author's Clarendon Lectures in Finance, examines the empirical behaviour of corporate default risk. A new and unified statistical methodology for default prediction, based on stochastic intensity modeling, is explained and implemented with data on U.S. public corporations since 1980. Special attention is given to the measurement of correlation of default risk across firms. The underlying work was developed in a series of collaborations over roughly the past decade with Sanjiv Das, Andreas Eckner, Guillaume Horel, Nikunj Kapadia, Leandro Saita, and Ke Wang. Where possible, the content based on methodology has been separated from the substantive empirical findings, in order to provide access to the latter for those less focused on the mathematical foundations. A key finding is that corporate defaults are more clustered in time than would be suggested by their exposure to observable common or correlated risk factors. The methodology allows for hidden sources of default correlation, which are particularly important to include when estimating the likelihood that a portfolio of corporate loans will suffer large default losses. The data also reveal that a substantial amount of power for predicting the default of a corporation can be obtained from the firm's "distance to default," a volatility-adjusted measure of leverage that is the basis of the theoretical models of corporate debt pricing of Black, Scholes, and Merton. The findings are particularly relevant in the aftermath of the financial crisis, which revealed a lack of attention to the proper modelling of correlation of default risk across firms.

View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart

This book, based on the author's Clarendon Lectures in Finance, examines the empirical behaviour of corporate default risk. A new and unified statistical methodology for default prediction, based on stochastic intensity modeling, is explained and implemented with data on U.S. public corporations since 1980. Special attention is given to the measurement of correlation of default risk across firms. The underlying work was developed in a series of collaborations over roughly the past decade with Sanjiv Das, Andreas Eckner, Guillaume Horel, Nikunj Kapadia, Leandro Saita, and Ke Wang. Where possible, the content based on methodology has been separated from the substantive empirical findings, in order to provide access to the latter for those less focused on the mathematical foundations. A key finding is that corporate defaults are more clustered in time than would be suggested by their exposure to observable common or correlated risk factors. The methodology allows for hidden sources of default correlation, which are particularly important to include when estimating the likelihood that a portfolio of corporate loans will suffer large default losses. The data also reveal that a substantial amount of power for predicting the default of a corporation can be obtained from the firm's "distance to default," a volatility-adjusted measure of leverage that is the basis of the theoretical models of corporate debt pricing of Black, Scholes, and Merton. The findings are particularly relevant in the aftermath of the financial crisis, which revealed a lack of attention to the proper modelling of correlation of default risk across firms.

More books from OUP Oxford

Cover of the book Living Words by Darrell Duffie
Cover of the book Professional Conduct Casebook by Darrell Duffie
Cover of the book The Law of Industrial Action and Trade Union Recognition by Darrell Duffie
Cover of the book Fichte's Ethics by Darrell Duffie
Cover of the book Monads, Composition, and Force by Darrell Duffie
Cover of the book Britain Begins by Darrell Duffie
Cover of the book Multiple Stable States in Natural Ecosystems by Darrell Duffie
Cover of the book Eurekas and Euphorias by Darrell Duffie
Cover of the book Empiricism and Language Learnability by Darrell Duffie
Cover of the book New York Scientific by Darrell Duffie
Cover of the book Re-Envisioning Christian Humanism by Darrell Duffie
Cover of the book The Oxford Handbook of Neolithic Europe by Darrell Duffie
Cover of the book Agricola and Germany by Darrell Duffie
Cover of the book Faith and Its Critics by Darrell Duffie
Cover of the book Depression: A Very Short Introduction by Darrell Duffie
We use our own "cookies" and third party cookies to improve services and to see statistical information. By using this website, you agree to our Privacy Policy