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An Urn-Based Nonparametric Modeling of the Dependence between PD and LGD with an Application to Mortgages. / Cheng, Dan; Cirillo, Pasquale.

In: Risks, Vol. 7, No. 3, 76, 07.2019, p. 1-21.

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@article{eeede3eabfd94ffdb128675553aa1970,
title = "An Urn-Based Nonparametric Modeling of the Dependence between PD and LGD with an Application to Mortgages",
abstract = "We propose an alternative approach to the modeling of the positive dependence between the probability of default and the loss given default in a portfolio of exposures, using a bivariate urn process. The model combines the power of Bayesian nonparametrics and statistical learning, allowing for the elicitation and the exploitation of experts{\textquoteright} judgements, and for the constant update of this information over time, every time new data are available. A real-world application on mortgages is described using the Single Family Loan-Level Dataset by Freddie Mac. ",
keywords = "Dependence, Loss given default, Probability of default, Urn model, Wrong-way risk",
author = "Dan Cheng and Pasquale Cirillo",
year = "2019",
month = jul,
doi = "10.3390/risks7030076",
language = "English",
volume = "7",
pages = "1--21",
journal = "Risks",
issn = "2227-9091",
publisher = "MDPI",
number = "3",

}

RIS

TY - JOUR

T1 - An Urn-Based Nonparametric Modeling of the Dependence between PD and LGD with an Application to Mortgages

AU - Cheng, Dan

AU - Cirillo, Pasquale

PY - 2019/7

Y1 - 2019/7

N2 - We propose an alternative approach to the modeling of the positive dependence between the probability of default and the loss given default in a portfolio of exposures, using a bivariate urn process. The model combines the power of Bayesian nonparametrics and statistical learning, allowing for the elicitation and the exploitation of experts’ judgements, and for the constant update of this information over time, every time new data are available. A real-world application on mortgages is described using the Single Family Loan-Level Dataset by Freddie Mac.

AB - We propose an alternative approach to the modeling of the positive dependence between the probability of default and the loss given default in a portfolio of exposures, using a bivariate urn process. The model combines the power of Bayesian nonparametrics and statistical learning, allowing for the elicitation and the exploitation of experts’ judgements, and for the constant update of this information over time, every time new data are available. A real-world application on mortgages is described using the Single Family Loan-Level Dataset by Freddie Mac.

KW - Dependence

KW - Loss given default

KW - Probability of default

KW - Urn model

KW - Wrong-way risk

UR - http://www.scopus.com/inward/record.url?scp=85071186688&partnerID=8YFLogxK

U2 - 10.3390/risks7030076

DO - 10.3390/risks7030076

M3 - Article

VL - 7

SP - 1

EP - 21

JO - Risks

JF - Risks

SN - 2227-9091

IS - 3

M1 - 76

ER -

ID: 55021477