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ETH Practitioner Seminar in Financial and Insurance Mathematics
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The ETH Practitioner Seminar in Financial and Insurance Mathematics brings together mathematicians working in industry and research. The seminar will take place 2 to 3 times per semester. To exchange ideas, the presentation will be followed by an informal discussion in form of an apero (Common Room (HG G 69)).
Spring Semester 2017
Note: The highlighted event marks the next occurring event and events marked with an asterisk (*) indicate that the time and/or location are different from the usual time and/or location.
Date / Time | Speaker | Title | Location | |
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16 March 2017 18:00-19:00 |
Christoph Frei UBS and University of Alberta Marcus Wunsch UBS |
Modeling Credit Risk of Loan Portfolios in the Presence of Autocorrelation | HG G 43 | |
Abstract: In the first part of the talk, we review Merton's classical structural credit risk model, which is used frequently in both academia and practice to model credit risk of a loan portfolio. The default of an obligor in the credit portfolio is modeled as the event when the obligor's asset return over the simulation horizon falls below some threshold. The asset return is driven by factors that are correlated across different obligors. The estimation of these latent correlations has a significant impact on values of risk measures at the portfolio level. However, since the underlying factors often exhibit autocorrelation, finding accurate estimators is not straightforward, but crucial in practice. In the second part of the talk, we show how method of moments estimators can be adjusted to account for autocorrelation in the factors. Our adjustment is based on convergence and approximation results for general autocorrelated time series. Its application to the estimators used in credit risk modeling allows us to remove a large part of the estimation bias, thus providing more accurate values of risk measures at the portfolio level. | ||||
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7 June 2017 18:00-20:00 |
Title T.B.A. | HG G 43 |