DefaultRisk.com the web's biggest credit risk modeling resource. |  |
|
|
| Self-exciting Corporate Defaults: Contagion vs. frailty by Shahriar Azizpour of Stanford University, and August 29, 2008 Abstract: Why do corporate defaults cluster? This paper explores the role of contagion, by which the default of a firm has a direct impact on the conditional default rates of the surviving firms, channeled through the complex web of contractual relationships in the economy. We develop filtered maximum likelihood estimators and goodness-of-t tests for point processes to measure the additional impact of contagion on default rates, over and beyond that due to firms' exposure to observable or unobservable (frailty) risk factors. For U.S. firms during 1970{2006, we find strong evidence that contagion represents a significant additional source of default clustering. JEL Classification: C11, C15, C41, E44, G33. Keywords: Correlated default, event feedback, contagion, frailty, self-exciting point process, intensity, point process filtering and smoothing, measure change, likelihood, goodness-of- t, time change. Books Referenced in this Paper: (what is this?)
Download paper (512K PDF) 40 pages
[Home] [Credit Correlation Papers]  |
|
Please contact me with problems or suggestions. |
