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Inferring Default Correlation from Equity Return Correlation
dc.contributor.authorLiu, Sheenen_US
dc.contributor.authorQi, Howarden_US
dc.contributor.authorShi, Jianen_US
dc.contributor.authorXie, Yan Aliceen_US
dc.date.accessioned2015-04-02T15:12:09Z
dc.date.available2016-05-10T20:26:28Zen
dc.date.issued2015-03en_US
dc.identifier.citationLiu, Sheen; Qi, Howard; Shi, Jian; Xie, Yan Alice (2015). "Inferring Default Correlation from Equity Return Correlation." European Financial Management 21(2): 333-359.en_US
dc.identifier.issn1354-7798en_US
dc.identifier.issn1468-036Xen_US
dc.identifier.urihttps://hdl.handle.net/2027.42/110821
dc.description.abstractThis paper presents a new approach for estimating default correlation by linking default correlation to equity return correlation while preserving the fundamental relation between default and asset correlations in the structural framework. Our hybrid model thus overcomes a long‐standing empirical difficulty that default correlation estimation relies on the unobservable asset process. The empirical analysis shows that our hybrid model demonstrates a considerable improvement over the existing structural model of Zhou (2001) for the sample periods of 1970‐1993 and 1990‐2010. We also illustrate the difference between the two models in predicting default correlations over the period of the 2008 financial crisis.en_US
dc.publisherWiley Periodicals, Inc.en_US
dc.publisherThe McGraw‐Hill Companiesen_US
dc.subject.otherequity (return) correlationen_US
dc.subject.otherdefaultable bondsen_US
dc.subject.otherstructural modelen_US
dc.subject.otherDefault correlationen_US
dc.titleInferring Default Correlation from Equity Return Correlationen_US
dc.typeArticleen_US
dc.rights.robotsIndexNoFollowen_US
dc.subject.hlbsecondlevelFinanceen_US
dc.subject.hlbsecondlevelManagementen_US
dc.subject.hlbtoplevelBusinessen_US
dc.description.peerreviewedPeer Revieweden_US
dc.description.bitstreamurlhttp://deepblue.lib.umich.edu/bitstream/2027.42/110821/1/eufm12016.pdf
dc.identifier.doi10.1111/eufm.12016en_US
dc.identifier.sourceEuropean Financial Managementen_US
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dc.owningcollnameInterdisciplinary and Peer-Reviewed


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