Project CEMAPRE internal
|Title||From Ruin Theory to Credit Risk|
|Participants||Rui M.R. Cardoso, Alfredo Egídio dos Reis (Principal Investigator), Mónica Martinho|
|Summary||This project discusses credit risk, in particular the finite time probability of default. We aim to|
use the models widely studied in risk and ruin theory, a branch of actuarial science, for computing
portfolio ruin probabilities. We will work them for application to the probability of default in
credit risk. We are interested in interest rate calculation considering different levels of credit
default and credit products.
The well known classical ruin model can be extended to take account with the particular features of
interest rate estimation. We intend to start with the compound Poisson risk model, then generalize
for other sorts of renewal models. We will compute ultimate and finite time run probabilities,
particularly "one year ruin probabilities", aiming to find the corresponding annual interest rates
that take into account with default. Among others, we will consider the works by Chen and Panjer
(2009) and Penha (2016).