Additive Intensity Regression Models in Corporate Default Analysis

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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.
Original languageEnglish
JournalJournal of Financial Econometrics
Issue number3
Pages (from-to)443-485
Number of pages43
Publication statusPublished - Jun 2013


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

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