Stable Non-Gaussian Models for Credit Risk Management
Bernhard Martin Institute of Statistics and Mathematical Economics, University of Karlsruhe, Germany
Svetlozar T. Rachev Department of Statistics and Applied Probability, University of California, Santa Barbara, USA Institute of Statistics and Mathematical Economics, University of Karlsruhe, Germany e-mail: rachev@lsoe-4.wiwi.uni-karlsruhe.de
Eduardo S. Schwartz Anderson School of Management, University of California, Los Angeles, USA
Abstract
Unlike the credit risk models based on the normal assumption, the model in this chapter assumes credit returns to follow a stable distribution. As empirical studies show, the daily returns of a bond and its credit spread obey a stable law, ...
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