Forecasting bank loans loss-given-default

With the advent of the new Basel Capital Accord, banking organizations are invited to estimate credit risk capital requirements using an internal ratings based approach. In order to be compliant with this approach, institutions must estimate the expected loss-given-default, the fraction of the credit exposure that is lost if the borrower defaults. This study evaluates the ability of a parametric fractional response regression and a nonparametric regression tree model to forecast bank loan credit losses. The out-of-sample predictive ability of these models is evaluated at several recovery horizons after the default event. The out-of-time predictive ability is also estimated for a recovery horizon of one year. The performance of the models is benchmarked against recovery estimates given by historical averages. The results suggest that regression trees are an interesting alternative to parametric models in modeling and forecasting loss-given-default.Loss-given-default, Forecasting, Bank loans, Fractional response regression, Regression trees

A Multivariate Training Technique with Event Reweighting

An event reweighting technique incorporated in multivariate training algorithm has been developed and tested using the Artificial Neural Networks (ANN) and Boosted Decision Trees (BDT). The event reweighting training are compared to that of the conventional equal event weighting based on the ANN and the BDT performance. The comparison is performed in the context of the physics analysis of the ATLAS experiment at the Large Hadron Collider (LHC), which will explore the fundamental nature of matter and the basic forces that shape our universe. We demonstrate that the event reweighting technique provides an unbiased method of multivariate training for event pattern recognition.Comment: 20 pages, 8 figure

The structure of international stock market returns

The behavior of international stock market returns in terms of their distributional properties, serial dependence, long-memory and conditional volatility is examined. A factor analysis is employed to identify the underlying dimensions of the returns. The analysis reveals the existence of meaningful factors when these are estimated from the empirical properties of a large set of international equity indices. Furthermore, the factor scores discriminate very well the stock markets according to size and level of development.International stock markets; Serial dependence; Long-memory; Conditional volatility; Factor analysis.

Recurrence quantification analysis of global stock markets

This study investigates the presence of deterministic dependencies in international stock markets using recurrence plots and recurrence quantification analysis (RQA). The results are based on a large set of free float-adjusted market capitalization stock indices, covering a period of 15 years. The statistical tests suggest that the dynamics of stock prices in emerging markets is characterized by higher values of RQA measures when compared to their developed counterparts. The behavior of stock markets during critical financial events, such as the burst of the technology bubble, the Asian currency crisis, and the recent subprime mortgage crisis, is analyzed by performing RQA in sliding windows. It is shown that during these events stock markets exhibit a distinctive behavior that is characterized by temporary decreases in the fraction of recurrence points contained in diagonal and vertical structures.Recurrence plot, Recurrence quantification analysis, Nonlinear dynamics, International stock markets

Melnikov analysis in nonsmooth differential systems with nonlinear switching manifold

We study the family of piecewise linear differential systems in the plane with two pieces separated by a cubic curve. Our main result is that 7 is a lower bound for the Hilbert number of this family. In order to get our main result, we develop the Melnikov functions for a class of nonsmooth differential systems, which generalizes, up to order 2, some previous results in the literature. Whereas the first order Melnikov function for the nonsmooth case remains the same as for the smooth one (i.e. the first order averaged function) the second order Melnikov function for the nonsmooth case is different from the smooth one (i.e. the second order averaged function). We show that, in this case, a new term depending on the jump of discontinuity and on the geometry of the switching manifold is added to the second order averaged function

Performance of extended space-time coding techniques for MIMO MC-CDMA systems

In this paper we consider a transmission system based on MC-CDMA, where signal spreading is performed entirely in the frequency domain. An extended spacetime coding technique, the Double Alamouti, is evaluated considering a MIMO channel. This assessment is made against standard Alamouti coding, for two different Tx/Rx antenna schemes (2x1 and 2x2). Numerical results, attained through system model simulations, are presented for performance evaluation under realistic scenarios considering some typical system impairments. These results show that in practical systems significant improvements can be achieved by using the Double Alamouti coding scheme