Additive Intensity Regression Models in Corporate Default Analysis

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Resumé

We consider additive intensity (Aalen) models as an alternative to the multiplicative intensity (Cox) models for analyzing the default risk of a sample of rated, nonfinancial U.S. firms. The setting allows for estimating and testing the significance of time-varying effects. We use a variety of model checking techniques to identify misspecifications. In our final model, we find evidence of time-variation in the effects of distance-to-default and short-to-long term debt. Also we identify interactions between distance-to-default and other covariates, and the quick ratio covariate is significant. None of our macroeconomic covariates are significant.
We consider additive intensity (Aalen) models as an alternative to the multiplicative intensity (Cox) models for analyzing the default risk of a sample of rated, nonfinancial U.S. firms. The setting allows for estimating and testing the significance of time-varying effects. We use a variety of model checking techniques to identify misspecifications. In our final model, we find evidence of time-variation in the effects of distance-to-default and short-to-long term debt. Also we identify interactions between distance-to-default and other covariates, and the quick ratio covariate is significant. None of our macroeconomic covariates are significant.
SprogEngelsk
TidsskriftJournal of Financial Econometrics
Vol/bind11
Udgave nummer3
Sider443-485
ISSN1479-8409
DOI
StatusUdgivet - jun. 2013

Emneord

  • Aalen's additive regression model
  • Default risk modeling
  • Martingale residual processes

Citer dette

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author = "David Lando and Mamdouh Medhat and Nielsen, {Mads Stenbo} and Nielsen, {S{\o}ren Feodor}",
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Additive Intensity Regression Models in Corporate Default Analysis. / Lando, David; Medhat, Mamdouh; Nielsen, Mads Stenbo; Nielsen, Søren Feodor.

I: Journal of Financial Econometrics, Bind 11, Nr. 3, 06.2013, s. 443-485.

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

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