Wednesday 16 Oct 2013Default Probability Estimation with D-Vines

Luciana Dalla Valle - Plymouth University

Plymouth University, Fitzroy 208 14:00-14:50

The objective of this study is to present a novel Bayesian approach for default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula theory. Balance sheet data are used to assess the firm value and to compute its default probability. The firm pricing function is obtained via a pair copula approach, and Monte Carlo simulations are used to calculate the default probability distribution. The methodology is illustrated through an application to defaulted firms data.

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