Default Contagion with Domino Effect , A First Passage Time Approach
Jiro Akahori, Hai Ha Pham
TL;DR
This paper develops a structural framework using a first passage time approach to model dependent defaults and their contagion effects in financial systems.
Contribution
It introduces a novel first passage time methodology to analyze default contagion within a structural default model.
Findings
Provides a new approach to quantify default contagion
Enhances understanding of domino effect in credit risk
Offers a framework for risk management strategies
Abstract
The present paper introduces a structural framework to model dependent defaults, with a particular interest in their contagion.
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Taxonomy
TopicsCredit Risk and Financial Regulations · Banking stability, regulation, efficiency · Financial Distress and Bankruptcy Prediction