Essays in portfolio credit risk
Abstract/Contents
- Abstract
- This dissertation considers the measurement and management of portfolio credit risk. Collateralized debt obligations, which are securities with payoffs that are tied to the cash flows in a portfolio of defaultable assets such as corporate bonds, play a significant role in the financial crisis that has spread throughout the world. Insufficient capital provisioning due to flawed and overly optimistic risk assessments is at the center of the problem. In the first part of the dissertation, we develop stochastic methods to measure the risk of positions in collateralized debt obligations and related instruments tied to an underlying portfolio of defaultable assets. We propose an adaptive point process model of portfolio default timing, a maximum likelihood method for estimating point process models that is based on an acceptance/rejection re-sampling scheme, and statistical tests for model validation. To illustrate these tools, they are used to estimate the distribution of the profit or loss generated by positions in multiple tranches of a collateralized debt obligation that references the CDX High Yield portfolio, and the risk capital required to support these positions. The second part of the dissertation develops maximum likelihood estimators of the term structure of systemic risk in the U.S. financial sector, defined as the conditional probability of failure of a large number of financial institutions. The estimators are based on a new dynamic hazard model of failure timing that captures the influence of time-varying macro-economic and sector-specific risk factors on the likelihood of failures, and the impact of risk spillovers due to contagion or incomplete information about relevant risk factors. The estimation results, which cover the period January 1987 to December 2008, provide strong evidence for the presence of failure clustering not caused by variations in the observable explanatory covariates, which include the trailing return on the S& P 500 index, the lagged slope of the U.S. yield curve, the default and TED spreads, and other sector-specific variables.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Publication date | 2010 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | Kim, Baeho |
|---|---|
| Associated with | Stanford University, Department of Management Science and Engineering |
| Primary advisor | Giesecke, Kay |
| Thesis advisor | Giesecke, Kay |
| Thesis advisor | Primbs, James |
| Thesis advisor | Weyant, John P. (John Peter) |
| Advisor | Primbs, James |
| Advisor | Weyant, John P. (John Peter) |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Baeho Kim. |
|---|---|
| Note | Submitted to the Department of Management Science and Engineering. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2010. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2010 by Baeho Kim
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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