Second Quarter (2004)

Sanjiv R. Das and Gary Geng Modeling correlated default risk is a new phenomenon currently sweeping through the credit markets. In this paper, we develop a methodology to model, simulate and assess the joint default process of hundreds of issuers. Our study is based on a data set of default probabilities supplied by Moody’s Risk… Read more

Peter Fledelius, David Lando and Jens Perch Nielsen Non-parametric analysis of rating transition intensities is a powerful way of visualizing such effects and is therefore useful both for quickly understanding the behavior of a rating system and for exploring data before setting up a full statistical model. In this paper we illustrate the use of… Read more

Robert A. Jarrow and Philip Protter This paper compares structural versus reduced form credit risk models from an information based perspective. We show that the difference between these two models types can be characterized in terms of the information assumed known by the modeler. Structural models assure that the modeler has the same information set… Read more

Hayne E. Leland This paper examines default probabilities predicted by alternative “structural” models of risky corporate debt. We focus on default probabilities rather than credit spreads because (i) they are not affected by additional market factors such as liquidity and tax differences; and (ii) prediction of the relative likelihood of default is often stated as… Read more