Default probability estimation via pair copula constructions
•We provide a methodology to accurately evaluate firm default probability.•Multivariate contingent claim model on balance sheet data for firm asset value.•Use of Bayesian parametric mixture models for vine-marginal modelling.•Asset and liability dependence structure is modelled via pair copula const...
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| Veröffentlicht in: | European journal of operational research 2016-02, Vol.249 (1), p.298-311 |
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| container_title | European journal of operational research |
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| creator | Dalla Valle, Luciana De Giuli, Maria Elena Tarantola, Claudia Manelli, Claudio |
| description | •We provide a methodology to accurately evaluate firm default probability.•Multivariate contingent claim model on balance sheet data for firm asset value.•Use of Bayesian parametric mixture models for vine-marginal modelling.•Asset and liability dependence structure is modelled via pair copula constructions.•Our approach allows us to correctly estimate the PD of defaulted as well as of sound firms.
In this paper we present a novel approach for firm default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula constructions. For each considered firm, balance sheet data are used to assess the asset value, and to compute its default probability. The asset pricing function is expressed via a pair copula construction, and it is approximated via Monte Carlo simulations. The methodology is illustrated through an application to the analysis of both operative and defaulted firms. |
| doi_str_mv | 10.1016/j.ejor.2015.08.026 |
| format | Article |
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In this paper we present a novel approach for firm default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula constructions. For each considered firm, balance sheet data are used to assess the asset value, and to compute its default probability. The asset pricing function is expressed via a pair copula construction, and it is approximated via Monte Carlo simulations. The methodology is illustrated through an application to the analysis of both operative and defaulted firms.</description><identifier>ISSN: 0377-2217</identifier><identifier>EISSN: 1872-6860</identifier><identifier>DOI: 10.1016/j.ejor.2015.08.026</identifier><identifier>CODEN: EJORDT</identifier><language>eng</language><publisher>Amsterdam: Elsevier B.V</publisher><subject>Default ; Default probability ; Estimating techniques ; Markov chain Monte Carlo ; Monte Carlo simulation ; Multivariate contingent claim ; Pair copula ; Probability ; Studies ; Vines</subject><ispartof>European journal of operational research, 2016-02, Vol.249 (1), p.298-311</ispartof><rights>2015 Elsevier B.V. and Association of European Operational Research Societies (EURO) within the International Federation of Operational Research Societies (IFORS)</rights><rights>Copyright Elsevier Sequoia S.A. Feb 16, 2016</rights><lds50>peer_reviewed</lds50><oa>free_for_read</oa><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c490t-85b40d30928dca4c84fd4b38e11b75bc39967ea934f4aff469228bd35ce763713</citedby><cites>FETCH-LOGICAL-c490t-85b40d30928dca4c84fd4b38e11b75bc39967ea934f4aff469228bd35ce763713</cites><orcidid>0000-0002-5963-3756 ; 0000-0001-9425-8982</orcidid></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktohtml>$$Uhttps://www.sciencedirect.com/science/article/pii/S0377221715007638$$EHTML$$P50$$Gelsevier$$H</linktohtml><link.rule.ids>314,776,780,3537,27901,27902,65306</link.rule.ids></links><search><creatorcontrib>Dalla Valle, Luciana</creatorcontrib><creatorcontrib>De Giuli, Maria Elena</creatorcontrib><creatorcontrib>Tarantola, Claudia</creatorcontrib><creatorcontrib>Manelli, Claudio</creatorcontrib><title>Default probability estimation via pair copula constructions</title><title>European journal of operational research</title><description>•We provide a methodology to accurately evaluate firm default probability.•Multivariate contingent claim model on balance sheet data for firm asset value.•Use of Bayesian parametric mixture models for vine-marginal modelling.•Asset and liability dependence structure is modelled via pair copula constructions.•Our approach allows us to correctly estimate the PD of defaulted as well as of sound firms.
In this paper we present a novel approach for firm default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula constructions. For each considered firm, balance sheet data are used to assess the asset value, and to compute its default probability. The asset pricing function is expressed via a pair copula construction, and it is approximated via Monte Carlo simulations. The methodology is illustrated through an application to the analysis of both operative and defaulted firms.</description><subject>Default</subject><subject>Default probability</subject><subject>Estimating techniques</subject><subject>Markov chain Monte Carlo</subject><subject>Monte Carlo simulation</subject><subject>Multivariate contingent claim</subject><subject>Pair copula</subject><subject>Probability</subject><subject>Studies</subject><subject>Vines</subject><issn>0377-2217</issn><issn>1872-6860</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2016</creationdate><recordtype>article</recordtype><recordid>eNp9kEtLxDAUhYMoOI7-AVcF1615NQ-YjYxPGHCj65CkKaTUpibpgP_elHHt6izuOfee-wFwi2CDIGL3Q-OGEBsMUdtA0UDMzsAGCY5rJhg8BxtIOK8xRvwSXKU0QFicqN2A3aPr9TLmao7BaONHn38ql7L_0tmHqTp6Xc3ax8qGeRl1kSnluNh1mK7BRa_H5G7-dAs-n58-9q_14f3lbf9wqC2VMNeiNRR2BEosOqupFbTvqCHCIWR4ayyRknGnJaE91X1PmcRYmI601nFGOCJbcHfaW0p-L6WdGsISp3JSIU4IkpxJUVz45LIxpBRdr-ZY3og_CkG1UlKDWimplZKCQhVKJbQ7hVzpf_QuqmS9m6zrfHQ2qy74_-K_HrRwjg</recordid><startdate>20160216</startdate><enddate>20160216</enddate><creator>Dalla Valle, Luciana</creator><creator>De Giuli, Maria Elena</creator><creator>Tarantola, Claudia</creator><creator>Manelli, Claudio</creator><general>Elsevier B.V</general><general>Elsevier Sequoia S.A</general><scope>AAYXX</scope><scope>CITATION</scope><scope>7SC</scope><scope>7TB</scope><scope>8FD</scope><scope>FR3</scope><scope>JQ2</scope><scope>L7M</scope><scope>L~C</scope><scope>L~D</scope><orcidid>https://orcid.org/0000-0002-5963-3756</orcidid><orcidid>https://orcid.org/0000-0001-9425-8982</orcidid></search><sort><creationdate>20160216</creationdate><title>Default probability estimation via pair copula constructions</title><author>Dalla Valle, Luciana ; De Giuli, Maria Elena ; Tarantola, Claudia ; Manelli, Claudio</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c490t-85b40d30928dca4c84fd4b38e11b75bc39967ea934f4aff469228bd35ce763713</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2016</creationdate><topic>Default</topic><topic>Default probability</topic><topic>Estimating techniques</topic><topic>Markov chain Monte Carlo</topic><topic>Monte Carlo simulation</topic><topic>Multivariate contingent claim</topic><topic>Pair copula</topic><topic>Probability</topic><topic>Studies</topic><topic>Vines</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Dalla Valle, Luciana</creatorcontrib><creatorcontrib>De Giuli, Maria Elena</creatorcontrib><creatorcontrib>Tarantola, Claudia</creatorcontrib><creatorcontrib>Manelli, Claudio</creatorcontrib><collection>CrossRef</collection><collection>Computer and Information Systems Abstracts</collection><collection>Mechanical & Transportation Engineering Abstracts</collection><collection>Technology Research Database</collection><collection>Engineering Research Database</collection><collection>ProQuest Computer Science Collection</collection><collection>Advanced Technologies Database with Aerospace</collection><collection>Computer and Information Systems Abstracts Academic</collection><collection>Computer and Information Systems Abstracts Professional</collection><jtitle>European journal of operational research</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Dalla Valle, Luciana</au><au>De Giuli, Maria Elena</au><au>Tarantola, Claudia</au><au>Manelli, Claudio</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Default probability estimation via pair copula constructions</atitle><jtitle>European journal of operational research</jtitle><date>2016-02-16</date><risdate>2016</risdate><volume>249</volume><issue>1</issue><spage>298</spage><epage>311</epage><pages>298-311</pages><issn>0377-2217</issn><eissn>1872-6860</eissn><coden>EJORDT</coden><abstract>•We provide a methodology to accurately evaluate firm default probability.•Multivariate contingent claim model on balance sheet data for firm asset value.•Use of Bayesian parametric mixture models for vine-marginal modelling.•Asset and liability dependence structure is modelled via pair copula constructions.•Our approach allows us to correctly estimate the PD of defaulted as well as of sound firms.
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| ispartof | European journal of operational research, 2016-02, Vol.249 (1), p.298-311 |
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| language | eng |
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| source | Elsevier ScienceDirect Journals |
| subjects | Default Default probability Estimating techniques Markov chain Monte Carlo Monte Carlo simulation Multivariate contingent claim Pair copula Probability Studies Vines |
| title | Default probability estimation via pair copula constructions |
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