4,234 research outputs found
Social Justice in the EU and OECD. Bertelsmann Stiftung Index Report 2019
With the onset of the economic and financial crisis, social justice has deteriorated
– on average – in the OECD and EU countries surveyed by the SJI.1 While the Social
Justice Index shows a slight but ongoing upward trend since economic recovery
began in 2014, the overall score remains below the pre-crisis level. In addition,
there are still striking discrepancies with regard to available opportunities to participate
in society in the 41 countries surveyed
Unbiased estimation of risk
The estimation of risk measures recently gained a lot of attention, partly
because of the backtesting issues of expected shortfall related to
elicitability. In this work we shed a new and fundamental light on optimal
estimation procedures of risk measures in terms of bias. We show that once the
parameters of a model need to be estimated, one has to take additional care
when estimating risks. The typical plug-in approach, for example, introduces a
bias which leads to a systematic underestimation of risk. In this regard, we
introduce a novel notion of unbiasedness to the estimation of risk which is
motivated by economic principles. In general, the proposed concept does not
coincide with the well-known statistical notion of unbiasedness. We show that
an appropriate bias correction is available for many well-known estimators. In
particular, we consider value-at-risk and expected shortfall (tail
value-at-risk). In the special case of normal distributions, closed-formed
solutions for unbiased estimators can be obtained. We present a number of
motivating examples which show the outperformance of unbiased estimators in
many circumstances. The unbiasedness has a direct impact on backtesting and
therefore adds a further viewpoint to established statistical properties
Dynamic Defaultable Term Structure Modelling beyond the Intensity Paradigm
The two main approaches in credit risk are the structural approach pioneered
in Merton (1974) and the reduced-form framework proposed in Jarrow & Turnbull
(1995) and in Artzner & Delbaen (1995). The goal of this article is to provide
a unified view on both approaches. This is achieved by studying reduced-form
approaches under weak assumptions. In particular we do not assume the global
existence of a default intensity and allow default at fixed or predictable
times with positive probability, such as coupon payment dates.
In this generalized framework we study dynamic term structures prone to
default risk following the forward-rate approach proposed in
Heath-Jarrow-Morton (1992). It turns out, that previously considered models
lead to arbitrage possibilities when default may happen at a predictable time
with positive probability. A suitable generalization of the forward-rate
approach contains an additional stochastic integral with atoms at predictable
times and necessary and sufficient conditions for a suitable no-arbitrage
condition (NAFL) are given. In the view of efficient implementations we develop
a new class of affine models which do not satisfy the standard assumption of
stochastic continuity.
The chosen approach is intimately related to the theory of enlargement of
filtrations, to which we provide a small example by means of filtering theory
where the Azema supermartingale contains upward and downward jumps, both at
predictable and totally inaccessible stopping times
Quadratic Portfolio Credit Risk models with Shot-noise Effects
We propose a reduced form model for default that allows us to derive closed-form solutions to all the key ingredients in credit risk modeling: risk-free bond prices, defaultable bond prices (with and without stochastic recovery) and probabilities of survival. We show that all these quantities can be represented in general exponential quadratic forms, despite the fact that the intensity is allowed to jump producing shot-noise effects. In addition, we show how to price defaultable digital puts, CDSs and options on defaultable bonds. Further on, we study a model for portfolio credit risk where we consider both firm specific and systematic risks. The model generalizes the attempt from Duffie and Garleanu (2001). We find that the model produces realistic default correlation and clustering of defaults. Then, we show how to price first-to-default swaps, CDOs, and draw the link to currently proposed credit indices.Credit risk; reduced-form models; CDS; CDO; quadratic term structures; shot-noise
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