TY - GEN
T1 - Evolutionary approaches for estimating a coupled markov chain model for credit portfolio risk management
AU - Hochreiter, Ronald
AU - Wozabal, David
PY - 2009
Y1 - 2009
N2 - The analysis and valuation of structured credit products gained significant importance during the sub-prime mortgage crisis in 2007. Financial companies still hold many products for which the risk exposure is unknown. The Coupled Markov Chain approach can be used to model rating transitions and thereby default probabilities of companies. The likelihood of the model turns out to be a non-convex function of nthe parameters to be estimated. Therefore heuristics are applied to find the ML estimators. In this paper, we outline the model and its likelihood function, and present a Particle Swarm Optimization algorithm, as well as an Evolutionary Optimization algorithm to maximize this likelihood function. Numerical results concluDe the paper. © Springer-Verlag Berlin Heidelberg 2009.
AB - The analysis and valuation of structured credit products gained significant importance during the sub-prime mortgage crisis in 2007. Financial companies still hold many products for which the risk exposure is unknown. The Coupled Markov Chain approach can be used to model rating transitions and thereby default probabilities of companies. The likelihood of the model turns out to be a non-convex function of nthe parameters to be estimated. Therefore heuristics are applied to find the ML estimators. In this paper, we outline the model and its likelihood function, and present a Particle Swarm Optimization algorithm, as well as an Evolutionary Optimization algorithm to maximize this likelihood function. Numerical results concluDe the paper. © Springer-Verlag Berlin Heidelberg 2009.
UR - https://www.scopus.com/pages/publications/67650677062
UR - https://www.scopus.com/pages/publications/67650677062#tab=citedBy
U2 - 10.1007/978-3-642-01129-0_23
DO - 10.1007/978-3-642-01129-0_23
M3 - Conference contribution
T3 - Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
SP - 193
EP - 202
BT - Applications of Evolutionary Computing - EvoWorkshops 2009: EvoCOMNET, EvoENVIRONMENT, EvoFIN, EvoGAMES, EvoHOT, EvoIASP, EvoINTERACTION, EvoMUSART, EvoNUM, EvoSTOC, EvoTRANSLOG, Proceedings
T2 - Applications of Evolutionary Computing, EvoWorkshops 2009: EvoCOMNET, EvoENVIRONMENT, EvoFIN, EvoGAMES, EvoHOT, EvoIASP, EvoINTERACTION, EvoMUSART, EvoNUM, EvoSTOC, EvoTRANSLOG
Y2 - 15 April 2009 through 17 April 2009
ER -