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| Auteurs principaux: | , , |
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| Format: | Preprint |
| Publié: |
2025
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| Sujets: | |
| Accès en ligne: | https://arxiv.org/abs/2503.03306 |
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| _version_ | 1866909996915097600 |
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| author | Torri, Gabriele Giacometti, Rosella Farina, Gianluca |
| author_facet | Torri, Gabriele Giacometti, Rosella Farina, Gianluca |
| contents | We introduce a model for the loss distribution of a credit portfolio considering a contagion mechanism for the default of names which is the result of two independent components: an infection attempt generated by defaulting entities and a failed defence from healthy ones. We then propose an efficient recursive algorithm for the loss distribution. Then we extend the framework with more flexible distributions that integrate a contagion
component and a systematic factor to better fit real-world data. Finally, we propose an empirical application in which we price synthetic CDO tranches of the iTraxx index, finding a good fit for multiple tranches. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2503_03306 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Modeling portfolio loss distribution under infectious defaults and immunization Torri, Gabriele Giacometti, Rosella Farina, Gianluca Pricing of Securities We introduce a model for the loss distribution of a credit portfolio considering a contagion mechanism for the default of names which is the result of two independent components: an infection attempt generated by defaulting entities and a failed defence from healthy ones. We then propose an efficient recursive algorithm for the loss distribution. Then we extend the framework with more flexible distributions that integrate a contagion component and a systematic factor to better fit real-world data. Finally, we propose an empirical application in which we price synthetic CDO tranches of the iTraxx index, finding a good fit for multiple tranches. |
| title | Modeling portfolio loss distribution under infectious defaults and immunization |
| topic | Pricing of Securities |
| url | https://arxiv.org/abs/2503.03306 |