Quotation Herbertsson, Alexander, Frey, Rüdiger. 2014. Parameter Estimation in Credit Models Under Incomplete Information. Communications in Statistics. Theory and Methods 43 (7): 1409-1436.


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Abstract

We consider the filtering model of Frey and Schmidt (2012) stated under the real probability measure and develop a method for estimating the parameters in this framework by using time-series data of CDS index spreads and classical maximum-likelihood algorithms. The estimation-approach incorporates the Kushner-Stratonovich SDE for the dynamics of the filtering probabilities. The convenient formula for the survival probability is a prerequisite for our estimation algorithm. We apply the developed maximum-likelihood algorithms on market data for historical CDS index spreads (iTraxx Europe Main Series) in order to estimate the parameters in the nonlinear filtering model for an exchangeable credit portfolio. Several such estimations are performed as well as accompanying statistical and numerical computations.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Communications in Statistics. Theory and Methods
Citation Index SCI
Language English
Title Parameter Estimation in Credit Models Under Incomplete Information
Volume 43
Number 7
Year 2014
Page from 1409
Page to 1436
URL http://www.tandfonline.com/doi/full/10.1080/03610926.2013.835415#.Uyg24ocrlaR

Associations

People
Frey, Rüdiger (Details)
External
Herbertsson, Alexander
Organization
Institute for Statistics and Mathematics IN (Details)
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