Credit portfolio correlations with dynamic leverage ratios

Chiarella, C; Huang, N; Chi-Fai Lo, E

Credit portfolio correlations with dynamic leverage ratios

Chiarella, C Huang, N Chi-Fai Lo, E

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Publisher:: Wiley
Publication Type:: Chapter
Citation:: Credit Securitisations and Derivatives: Challenges for the Global Markets, 2013, 1st, pp. 71 - 94
Issue Date:: 2013-01

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Field	Value	Language
dc.contributor.author	Chiarella, C	en_US
dc.contributor.author	Huang, N	en_US
dc.contributor.author	Chi-Fai Lo, E	en_US
dc.contributor.editor	Rösch, D	en_US
dc.contributor.editor	Scheule, H	en_US
dc.date.issued	2013-01	en_US
dc.identifier.citation	Credit Securitisations and Derivatives: Challenges for the Global Markets, 2013, 1st, pp. 71 - 94	en_US
dc.identifier.isbn	978-1-119-96396-7	en_US
dc.identifier.uri	http://hdl.handle.net/10453/27415
dc.description.abstract	This chapter extends the dynamic leverage ratio model of of Hui et al. to the two-firm case so as to study the implications for default correlations and joint survival probabilities. The two-firm model has been proposed by Zhou, who extends the one-firm model of Black and Cox to the two-firm situation. The chapter reviews the techniques used by the authors to solve the first-passage-time problem: the method of images and the time varying barrier technique for dealing with time-dependent parameters. The chapter presents the numerical results for the impact on joint survival probabilities and default correlations across a range of different scenarios, for example, different correlation levels, drift rates, volatilities and initial leverage ratios	en_US
dc.publisher	Wiley	en_US
dc.relation.ispartof	Credit Securitisations and Derivatives: Challenges for the Global Markets	en_US
dc.relation.isbasedon	10.1002/9781118818503.ch5	en_US
dc.title	Credit portfolio correlations with dynamic leverage ratios	en_US
dc.type	Chapter
utslib.location	Australia	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.citation.edition	1st	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.consider-herdc	true	en_US
pubs.edition	1st	en_US
pubs.place-of-publication	Australia	en_US

Abstract:

This chapter extends the dynamic leverage ratio model of of Hui et al. to the two-firm case so as to study the implications for default correlations and joint survival probabilities. The two-firm model has been proposed by Zhou, who extends the one-firm model of Black and Cox to the two-firm situation. The chapter reviews the techniques used by the authors to solve the first-passage-time problem: the method of images and the time varying barrier technique for dealing with time-dependent parameters. The chapter presents the numerical results for the impact on joint survival probabilities and default correlations across a range of different scenarios, for example, different correlation levels, drift rates, volatilities and initial leverage ratios

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/27415