Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JFI
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Fixed Income
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Fixed Income

The Journal of Fixed Income

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JFI
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter
Primary Article

Modeling Simultaneous Defaults

A Top-Down Approach

Michael Kunisch and Marliese Uhrig-Homburg
The Journal of Fixed Income Summer 2008, 18 (1) 25-36; DOI: https://doi.org/10.3905/jfi.2008.708841
Michael Kunisch
Research associate at the chair of financial engineering and derivatives at the Universität Karlsruhe (TH), Germany.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: kunisch@fbv.uni-karlsruhe.de
Marliese Uhrig-Homburg
A professor of finance at the Universität Karlsruhe (TH), Germany.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: derivate@fbv.uni-karlsruhe.de
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Abstract

This article provides a new approach to modeling dependent defaults in a portfolio. Our top-down approach involves modeling the defaults of a set of firms and then allocating the aggregate default risk in each set to the individual firms in the set. The major advantage of our approach is that we can easily incorporate economic factors that lead to high correlations in default intensities. Once we obtain a measure of default risk for a set of firms we apply a process called random thinning to characterize the default intensity of a single firm that is a member of the set. Each firm is assigned a portion of its set's default risk based on firm characteristics such as leverage, asset volatility, and asset correlation. This allows both pricing of portfolios and single name credits with the ease of a reduced form model and the economic motivation of a structural model. Furthermore, we do comparative static exercises to show how the model behaves and we conduct simulations to compare it to the reduced form and structural models' predictions of single and multi-name credit derivative prices.

  • © 2008 Pageant Media Ltd

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Fixed Income
Vol. 18, Issue 1
Summer 2008
  • Table of Contents
  • Index by author
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Fixed Income.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Modeling Simultaneous Defaults
(Your Name) has sent you a message from The Journal of Fixed Income
(Your Name) thought you would like to see the The Journal of Fixed Income web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Modeling Simultaneous Defaults
Michael Kunisch, Marliese Uhrig-Homburg
The Journal of Fixed Income Jun 2008, 18 (1) 25-36; DOI: 10.3905/jfi.2008.708841

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Modeling Simultaneous Defaults
Michael Kunisch, Marliese Uhrig-Homburg
The Journal of Fixed Income Jun 2008, 18 (1) 25-36; DOI: 10.3905/jfi.2008.708841
del.icio.us logo Digg logo Reddit logo Twitter logo CiteULike logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • Specification Risk and Calibration Effects of a Multifactor Credit Portfolio Model
  • Estimating the Joint Probability of Default Using Credit * Default Swap and Bond Data
  • Google Scholar

More in this TOC Section

  • A Loss Severity Model for Residential Mortgages
  • Empirical Evidence on CDO Performance
  • Annual Default Rates are Probably Less Than Long-Run Average Annual Default Rates
Show more Primary Article
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log in
  • Update your Profile
  • Give us your feedback

© 2021 Pageant Media Ltd | All Rights Reserved | ISSN: 1059-8596 | E-ISSN: 2168-8648

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies