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Credit contagion and credit risk
[journal article]
Abstract We study a simple, solvable model that allows us to investigate effects of credit contagion on the default probability of individual firms, in both portfolios of firms and on an economy wide scale.
While the effect of interactions may be small in typical (most probable) scenarios they are magnified,... view more
We study a simple, solvable model that allows us to investigate effects of credit contagion on the default probability of individual firms, in both portfolios of firms and on an economy wide scale.
While the effect of interactions may be small in typical (most probable) scenarios they are magnified, due to feedback, by situations of economic stress, which in turn leads to fatter tails
in loss distributions of large loan portfolios.... view less
Classification
Economic Statistics, Econometrics, Business Informatics
Financial Planning, Accountancy
Method
theory application
Free Keywords
Contagion; Credit Risk; Credit Models; Correlation Modelling
Document language
English
Publication Year
2009
Page/Pages
p. 373-382
Journal
Quantitative Finance, 9 (2009) 4
DOI
https://doi.org/10.1080/14697680802464162
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)