Time Reversal and Last Passage Time of Diffusions with Applications to Credit Risk Management
| Autor: | Rusudan Kevkhishvili, Masahiko Egami |
|---|---|
| Rok vydání: | 2017 |
| Předmět: |
Statistics and Probability
050208 finance Leverage (finance) Computer science media_common.quotation_subject 05 social sciences Risk management framework Probability density function 01 natural sciences Mathematical Finance (q-fin.MF) FOS: Economics and business 010104 statistics & probability Quantitative Finance - Mathematical Finance Debt 0502 economics and business Econometrics 0101 mathematics Statistics Probability and Uncertainty Finance media_common Credit risk |
| DOI: | 10.48550/arxiv.1701.04565 |
| Popis: | We study time reversal, last passage time and $h$ -transform of linear diffusions. For general diffusions with killing, we obtain the probability density of the last passage time to an arbitrary level and analyse the distribution of the time left until killing after the last passage time. With these tools, we develop a new risk management framework for companies based on the leverage process (the ratio of a company asset process over its debt) and its corresponding alarming level. We also suggest how a company can determine the alarming level for the leverage process by constructing a relevant optimisation problem. |
| Databáze: | OpenAIRE |
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