Weitere Informationen zum ausgewählten Kolloquiumsvortrag:

Dependence Structures in Finance: Applications in Credit Risk Modeling and Pairs Trading

Dr. Fenghui Yu

Tuesday, 2022-01-18 14:00

In the first part of the talk, we develop a generalized interacting intensity-based contagious credit risk model with hidden Markov state process. The main contribution is that the model, as well as the closed-form default distributions derived are applicable to a wide class of default intensities with various forms of dependence structures. A number of practical problems can then be solved efficiently with these explicit formulas for the distribution of default times. In the second part of the talk, we discuss optimal pairs trading strategies under symmetric and non-symmetric trading constraints. Under the assumption that the price spread of a pair of correlated securities is mean-reverting and follows a Ornstein-Uhlenbeck process, closed-form trading strategies under each of the constraints are obtained in a mean-variance framework. Numerical results indicate that our pairs trading strategies have fairly good performance.