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Industry shocks and empirical evidences on defaults comovement
Dalarna University, School of Technology and Business Studies, Statistics.ORCID iD: 0000-0002-3183-3756
2009 (English)Report (Other academic)
Abstract [en]

It is commonly agreed that the credit defaults are correlated. However, the mechanism of such dependence is not yet fully understood. This paper contributes to the current understanding about the defaults comovement in the following way. Assuming that the industries provides the basis of defaults comovement it provides empirical evidence as to how such comovements can be modeled using correlated industry shocks. Generalized linear mixed model (GLMM) with correlated random effects is used to model the defaults comovement. Empirical evidences are drawn through analyzing individual borrower level credit history data obtained from two major Swedish banks between the period 1994-2000. The results show that the defaults are correlated both within and between industries but not over time (quarters). A discussion has also been presented as to how a GLMM for defaults correlation can be explained.

Place, publisher, year, edition, pages
Örebro, sweden.: Swedish Business School at Örebro University. , 2009.
Series
Working Paper Series, Swedish Business School at Örebro University., ISSN 1403-0586 ; 3
Keywords [en]
Credit risk, defaults contagion, GLMM, cluster correlation.
National Category
Probability Theory and Statistics
Research subject
Research Profiles 2009-2020, Complex Systems – Microdata Analysis
Identifiers
URN: urn:nbn:se:du-4535OAI: oai:dalea.du.se:4535DiVA, id: diva2:523192
Available from: 2010-02-13 Created: 2010-02-13 Last updated: 2021-11-12Bibliographically approved

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Alam, Moudud

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CiteExportLink to record
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Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • chicago-author-date
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  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
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  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf