The Annals of Applied Probability
- Ann. Appl. Probab.
- Volume 23, Number 1 (2013), 348-385.
Default clustering in large portfolios: Typical events
We develop a dynamic point process model of correlated default timing in a portfolio of firms, and analyze typical default profiles in the limit as the size of the pool grows. In our model, a firm defaults at a stochastic intensity that is influenced by an idiosyncratic risk process, a systematic risk process common to all firms, and past defaults. We prove a law of large numbers for the default rate in the pool, which describes the “typical” behavior of defaults.
Ann. Appl. Probab., Volume 23, Number 1 (2013), 348-385.
First available in Project Euclid: 25 January 2013
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Giesecke, Kay; Spiliopoulos, Konstantinos; Sowers, Richard B. Default clustering in large portfolios: Typical events. Ann. Appl. Probab. 23 (2013), no. 1, 348--385. doi:10.1214/12-AAP845. https://projecteuclid.org/euclid.aoap/1359124389