Peter Spreij - Academia.edu (original) (raw)

Papers by Peter Spreij

Serie Research Memoranda, 1993

Department of Operations Research and System Theory [BS], 1986

RePEc: Research Papers in Economics, 2018

International Journal of Financial Engineering

The credit default swap (CDS) market plays an important role for financial institutions. This is ... more The credit default swap (CDS) market plays an important role for financial institutions. This is not only for their trading activities, but also as it provides a source of information to extract default probabilities to be used for (counterparty) credit risk purposes, as for instance in credit valuation adjustment calculations. Nonetheless, the number of entities for which liquid single-name CDSs are traded is of the order of a few thousands. This requires financial institutions to employ proxy methodologies to estimate the credit risk they face when trading with counterparties for which no (liquid) CDSs are available in the market. In this paper, we propose and compare different approaches to take into account counterparty-specific information in terms of rating, region, sector, etc. at cross-sectional level to strip risk-neutral default probabilities from CDSs. This is achieved by taking into account the intrinsic probabilistic information characterizing each CDS by means of suita...

Annals of Operations Research, 2022

Credit risk plays a key role in financial modeling, and financial institutions are required to in... more Credit risk plays a key role in financial modeling, and financial institutions are required to incorporate it in their pricing, as well as in capital requirement calculations. A common manner to extract credit worthiness information for existing and potential counterparties is based on the Credit Default Swap (CDS) market. Nonetheless, not all counterparties of a financial institution have (liquid) CDSs traded in the market. In this case, financial institutions shall employ a proxy methodology to estimate the default probabilities of these counterparties. Starting from the intersection methodology for credit curves, in this article we investigate whether it is possible to construct proxy credit curves from CDS quotes by means of (weighted) Wasserstein barycenters. We show how, under simple and common assumptions, this revised methodology leads to elementary and intuitive formulae to calculate distances between CDS-implied default probability distributions. Further, we illustrate how...

arXiv: Probability, 2018

In this paper we study limit behavior for a Markov-modulated (MM) binomial counting process, also... more In this paper we study limit behavior for a Markov-modulated (MM) binomial counting process, also called a binomial counting process under regime switching. The concept of Markov-modulation has become increasingly popular in many branches of science. For example, one can model asset prices with stochastic processes, or model the 'state of the economy' by a Markov. The binomial counting process naturally appears in the context of credit risk when multiple obligors are present. Markov modulation takes place when the failure/default rate of each individual obligor depends on an underlying Markov chain. The limit behavior under consideration occurs when the number of obligors increases unboundedly, and/or by accelerating the modulating Markov process, called rapid switching. The interest is in finding weak limits in each of these cases, more specifically of a functional central limit type. In other words we will study diffusion approximations. Depending on the specific circumsta...

Advances in Applied Probability, 1984

Consider the following situation: a computer program which presumably contains a certain number o... more Consider the following situation: a computer program which presumably contains a certain number of errors is tested over a given period of time, in order to infer some conclusions about its behaviour when used by future customers.

arXiv (Cornell University), Feb 24, 2023

Insurance: Mathematics and Economics, 2019

arXiv: Probability, 2016

In this short communication we present a (functional) central limit theorem for the idle process ... more In this short communication we present a (functional) central limit theorem for the idle process of a one-sided reflected Ornstein-Uhlenbeck proces.

arXiv (Cornell University), 2021

Methodology and Computing in Applied Probability, 2019

This paper develops asymptotics and approximations for ruin probabilities in a multivariate risk ... more This paper develops asymptotics and approximations for ruin probabilities in a multivariate risk setting. We consider a model in which the individual reserve processes are driven by a common Markovian environmental process. We subsequently consider a regime in which the claim arrival intensity and transition rates of the environmental process are jointly sped up, and one in which there is (with overwhelming probability) maximally one transition of the environmental process in the time interval considered. The approximations are extensively tested in a series of numerical experiments.