Affine Modeling of Credit Risk, Pricing of Credit Events, and Contagion

• 成果类型: Article
• 署名作者: Monfort, Alain; Pegoraro, Fulvio; Renne, Jean-Paul; Roussellet, Guillaume
• 署名单位: Institut Polytechnique de Paris; ENSAE Paris; Ecole Polytechnique; University of Lausanne; McGill University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.3658
• 发表日期: 2021
• 页码: 3674-3693
• 关键词: Ana credit risk model; gamma-zero distribution; no-jump condition; contagion; credit-event risk; sovereign credit risk and exchange rates

摘要

We propose a discrete-time affine pricing model that simultaneously allows for (i) the presence of systemic entities by departing from the no-jump condition on the factors' conditional distribution, (ii) contagion effects, and (iii) the pricing of credit events. Our affine framework delivers explicit pricing formulas for default-sensitive securities such as bonds and credit default swaps (CDSs). We estimate a euro-area multicountry version of the model and address economic questions related to the pricing of sovereign credit risk. We find that both frailty (common factors) and contagion phenomena are important to account for the joint dynamics of credit spreads. Our results also provide evidence of credit-event pricing, which is at the source of substantial credit risk premiums, even for short maturities. Finally, we extract measures of depreciation-at-default from CDSs denominated in different currencies.