IDEAS home Printed from https://ideas.repec.org/a/spr/metcap/v19y2017i3d10.1007_s11009-016-9525-4.html
   My bibliography  Save this article

Credit Risk in an Economy with New Firms Arrivals

Author

Listed:
  • Silvia Centanni

    (University of Verona)

  • Immacolata Oliva

    (University of Verona)

  • Paola Tardelli

    (University of L’Aquila)

Abstract

We propose a dynamic model to analyze the credit quality of firms. In the market in which they operate, the firms are divided into a finite number of classes representing their credit status. The cardinality of the population can increase, since new firms can enter the market and the partition is supposed to change over time, due to defaults and changes in credit quality, following a class of Markov processes. Some conditional probabilities related to default times are investigated and the role of occupation numbers is highlighted in this context. In a partial information setting at discrete time, we present a particle filtering technique to numerically compute by simulation the conditional distribution of the number of firms in the credit classes, given the information up to time t.

Suggested Citation

  • Silvia Centanni & Immacolata Oliva & Paola Tardelli, 2017. "Credit Risk in an Economy with New Firms Arrivals," Methodology and Computing in Applied Probability, Springer, vol. 19(3), pages 891-912, September.
    • Handle: RePEc:spr:metcap:v:19:y:2017:i:3:d:10.1007_s11009-016-9525-4
    DOI: 10.1007/s11009-016-9525-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11009-016-9525-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11009-016-9525-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Crouhy, Michel & Galai, Dan & Mark, Robert, 2001. "Prototype risk rating system," Journal of Banking & Finance, Elsevier, vol. 25(1), pages 47-95, January.
    2. Feng, D. & Gourieroux, C. & Jasiak, J., 2008. "The ordered qualitative model for credit rating transitions," Journal of Empirical Finance, Elsevier, vol. 15(1), pages 111-130, January.
    3. Tomas Björk & Mark Davis & Camilla Landén, 2010. "Optimal investment under partial information," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 71(2), pages 371-399, April.
    4. Silvia Ferrari & Francisco Cribari-Neto, 2004. "Beta Regression for Modelling Rates and Proportions," Journal of Applied Statistics, Taylor & Francis Journals, vol. 31(7), pages 799-815.
    5. Farnsworth, Heber & Li, Tao, 2007. "The Dynamics of Credit Spreads and Ratings Migrations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(3), pages 595-620, September.
    6. West, Rr, 1970. "Alternative Approach To Predicting Corporate Bond Ratings," Journal of Accounting Research, Wiley Blackwell, vol. 8(1), pages 118-125.
    7. Alexander Herbertsson, 2011. "Modelling default contagion using multivariate phase-type distributions," Review of Derivatives Research, Springer, vol. 14(1), pages 1-36, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Puneet Pasricha & Dharmaraja Selvamuthu & Guglielmo D’Amico & Raimondo Manca, 2020. "Portfolio optimization of credit risky bonds: a semi-Markov process approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-14, December.
    2. Paulo V. Carvalho & José D. Curto & Rodrigo Primor, 2022. "Macroeconomic determinants of credit risk: Evidence from the Eurozone," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2054-2072, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Caporale, Guglielmo Maria & Matousek, Roman & Stewart, Chris, 2012. "Ratings assignments: Lessons from international banks," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1593-1606.
    2. Muhammad Suhail Rizwan & Asifa Obaid & Dawood Ashraf, 2017. "The Impact of Corporate Social Responsibility on Default Risk: Empirical evidence from US Firms," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(3), pages 36-70, September.
    3. Chateau, Jean-Pierre D., 2011. "Contribution à la réglementation de Bâle-3 : de la consistance interne du continuum du crédit commercial en marquant à la « valeur de modèle » le risque de crédit des engagements de crédit," L'Actualité Economique, Société Canadienne de Science Economique, vol. 87(4), pages 445-479, décembre.
    4. Hwang, Ruey-Ching & Chung, Huimin & Chu, C.K., 2010. "Predicting issuer credit ratings using a semiparametric method," Journal of Empirical Finance, Elsevier, vol. 17(1), pages 120-137, January.
    5. Ruey-Ching Hwang, 2013. "Forecasting credit ratings with the varying-coefficient model," Quantitative Finance, Taylor & Francis Journals, vol. 13(12), pages 1947-1965, December.
    6. Patrick Gagliardini & Christian Gouriéroux, 2011. "Approximate Derivative Pricing for Large Classes of Homogeneous Assets with Systematic Risk," Journal of Financial Econometrics, Oxford University Press, vol. 9(2), pages 237-280, Spring.
    7. Domenico Piccolo & Rosaria Simone, 2019. "The class of cub models: statistical foundations, inferential issues and empirical evidence," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 28(3), pages 389-435, September.
    8. Francesco Ciampi, 2017. "The Need for Specific Modelling of Small Enterprise Default Prediction: Empirical Evidence from Italian Small Manufacturing Firms," International Journal of Business and Management, Canadian Center of Science and Education, vol. 12(12), pages 251-251, November.
    9. Yayan Hernuryadin & Koji Kotani & Tatsuyoshi Saijo, 2020. "Time Preferences of Food Producers: Does “Cultivate and Grow” Matter?," Land Economics, University of Wisconsin Press, vol. 96(1), pages 132-148.
    10. Mhamed Ben Salah & Cédric Chambru & Maleke Fourati, 2022. "The colonial legacy of education: evidence from of Tunisia," ECON - Working Papers 411, Department of Economics - University of Zurich, revised Sep 2024.
    11. Ameztegui, Aitor & Coll, Lluís & Messier, Christian, 2015. "Modelling the effect of climate-induced changes in recruitment and juvenile growth on mixed-forest dynamics: The case of montane–subalpine Pyrenean ecotones," Ecological Modelling, Elsevier, vol. 313(C), pages 84-93.
    12. Sokolova, Maria V., 2016. "Exchange Rates, International Trade and Growth: Re-Evaluation of Undervaluation," Conference papers 332790, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    13. Menz, Klaus-Michael, 2010. "Market discipline and the evaluation of Euro financial bonds--An empirical analysis," Research in International Business and Finance, Elsevier, vol. 24(3), pages 315-328, September.
    14. Grün, Bettina & Kosmidis, Ioannis & Zeileis, Achim, 2012. "Extended Beta Regression in R: Shaken, Stirred, Mixed, and Partitioned," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 48(i11).
    15. Dries P.J. Kuijper & Jakub W. Bubnicki & Marcin Churski & Bjorn Mols & Pim van Hooft, 2015. "Context dependence of risk effects: wolves and tree logs create patches of fear in an old-growth forest," Behavioral Ecology, International Society for Behavioral Ecology, vol. 26(6), pages 1558-1568.
    16. Guillermo Martínez-Flórez & Artur J. Lemonte & Germán Moreno-Arenas & Roger Tovar-Falón, 2022. "The Bivariate Unit-Sinh-Normal Distribution and Its Related Regression Model," Mathematics, MDPI, vol. 10(17), pages 1-26, August.
    17. Bedjo Santoso & Widodo Widodo & Muhammad Taufiq Akbar & Khaliq Ahmad & Rahmat Heru Setianto, 2022. "The Determinant of Sukuk Rating: Agency Theory and Asymmetry Theory Perspectives," Risks, MDPI, vol. 10(8), pages 1-23, July.
    18. Akoh Fabien Yao & Maxime Sèbe & Laura Recuero Virto & Abdelhak Nassiri & Hervé Dumez, 2024. "The effect of LNG bunkering on port competitiveness using multilevel data analysis [L'effet du soutage par GNL sur la compétitivité des ports à l'aide de l'analyse de données à plusieurs niveaux]," Post-Print hal-04611804, HAL.
    19. Qin Ma & Yanjun Su & Chunyue Niu & Qin Ma & Tianyu Hu & Xiangzhong Luo & Xiaonan Tai & Tong Qiu & Yao Zhang & Roger C. Bales & Lingli Liu & Maggi Kelly & Qinghua Guo, 2023. "Tree mortality during long-term droughts is lower in structurally complex forest stands," Nature Communications, Nature, vol. 14(1), pages 1-11, December.
    20. Maria De Paola & Vincenzo Scoppa, 2012. "The Causal Impact Of Closeness On Electoral Participation Exploiting The Italian Dual Ballot System," Working Papers 201203, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:metcap:v:19:y:2017:i:3:d:10.1007_s11009-016-9525-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.