Estimation of inter-sector asset correlations
Christian Meyer
TL;DR
This paper proposes a method to estimate inter-sector asset correlations by separating cross-sectional and time dimensions, enhancing the modeling of event dependencies like default risk.
Contribution
It introduces a novel approach to estimate inter-sector asset correlations through separation of cross-sectional and temporal data dimensions.
Findings
Provides a new estimation technique for asset correlations.
Improves modeling of event dependence in risk assessment.
Facilitates better risk management strategies.
Abstract
Asset correlations are an intuitive and therefore popular way to incorporate event dependence into event risk, e.g., default risk, modeling. In this paper we study the case of estimation of inter-sector asset correlations by separation of cross-sectional dimension and time dimension.
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Taxonomy
TopicsCredit Risk and Financial Regulations · Stochastic processes and financial applications · Financial Risk and Volatility Modeling