IDEAS home Printed from https://ideas.repec.org/a/wly/apsmbi/v23y2007i3p223-234.html
   My bibliography  Save this article

Kolmogorov–Smirnov‐type testing for the partial homogeneity of Markov processes—with application to credit risk

Author

Listed:
  • Rafael Weißbach
  • Holger Dette

Abstract

In banking, the default behaviour of the counterpart is not only of interest for the pricing of transactions under credit risk but also for the assessment of a portfolio credit risk. We develop a test against the hypothesis that default intensities are chronologically constant within a group of similar counterparts, e.g. a rating class. The Kolmogorov–Smirnov‐type test builds up on the asymptotic normality of counting processes in event history analysis. The right censoring accommodates for Markov processes with more than one no‐absorbing state. A simulation study and two examples of rating systems demonstrate that partial homogeneity can be assumed, however occasionally, certain migrations must be modelled and estimated inhomogeneously. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Rafael Weißbach & Holger Dette, 2007. "Kolmogorov–Smirnov‐type testing for the partial homogeneity of Markov processes—with application to credit risk," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 23(3), pages 223-234, May.
    • Handle: RePEc:wly:apsmbi:v:23:y:2007:i:3:p:223-234
    DOI: 10.1002/asmb.667
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/asmb.667
    Download Restriction: no
    File URL: https://libkey.io/10.1002/asmb.667?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
    ---><---

    More about this item

    Statistics

    Access and download statistics

    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:wly:apsmbi:v:23:y:2007:i:3:p:223-234. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1526-4025 .

    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.