A Copula Method for Correlation of Credit Rating Migration

Author

Xu, Xiaosi ; Chen, Ying ; Zheng, Jun

Author_Institution

Sch. of Manage., North China Coal Med. Univ., Tangshan, China

fYear

2009

fDate

24-26 July 2009

Firstpage

762

Lastpage

764

Abstract

How to monitor the changes of obligatorspsila credit rating is very important to manage credit risk, especially the obligators have strong correlated with each other, such as subprime mortgage loan crisis. In order to study the credit rating migration of obligators who have correlations with each other, we introduced a new tool to study the correlation of credit risk, the copula function, and built the general model to connect the margin distribution function to a joint distribution function of obligators, then We computed the migration rating matrix with S&Ppsilas data by t-copula, the results show that it is very important of correlation for studying credit rating migration in credit risk management.

Keywords

correlation theory; finance; matrix algebra; risk management; statistical distributions; copula method; correlation technique; credit rating migration; credit risk management; joint distribution function; margin distribution function; migration rating matrix; subprime mortgage loan crisis; Conference management; Crisis management; Distributed computing; Distribution functions; Engineering management; Financial management; Loans and mortgages; Random variables; Risk management; Time measurement; Credit risk; copula function; correlation; rating migration;

fLanguage

English

Publisher

ieee

Conference_Titel

Business Intelligence and Financial Engineering, 2009. BIFE '09. International Conference on

Conference_Location

Beijing

Print_ISBN

978-0-7695-3705-4

Type

conf

DOI

10.1109/BIFE.2009.176

Filename

5208752