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Jang, Hyun Jin
School of Business Administration
Research Interests
  • Quantitative risk management

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A copula-based systemic risk measure: application to investment-grade and high-yield CDS portfolios

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Title
A copula-based systemic risk measure: application to investment-grade and high-yield CDS portfolios
Author
Choi, So EunJang, Hyun JinChoe, Geon Ho
Issue Date
2019-10
Publisher
Chapman & Hall
Citation
APPLIED ECONOMICS LETTERS
Abstract
This study investigates the evolution of systemic risk inherent in investment-grade (IG) and high-yield (HY) CDS portfolios and compares the portfolios before and after the global financial crisis. To quantify systemic risk, we propose a novel measure – the expected default rate (EDR), defined by the average default rate of all institutions conditional upon one institution being in default. We implement the EDR under the one-factor copula framework with various dependence structures. We observe that the HY portfolio contains a higher systemic risk than the IG’s, overall, and the gap between the two widens after Lehman Brothers’ default. However, the model discrepancy for IG EDR is higher than that for HY, and for both the IG and HY EDRs, the discrepancies decrease over time.
URI
https://scholarworks.unist.ac.kr/handle/201301/28965
URL
https://www.tandfonline.com/doi/full/10.1080/13504851.2019.1676867
DOI
10.1080/13504851.2019.1676867
ISSN
1350-4851
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SBA_Journal Papers
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