Resource title

Kolmogorov-Smirnov-type testing for the partial homogeneity of Markov processes - with application to credit risk.

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Resource description

In banking the default behavior of the counterpart is of interest not only for the pricing of transactions under credit risk but also for the assessment of portfolio credit risk. We develop a test against the hypothesis that default intensities are constant over time within a homogeneous group of counterparts under investigation, e.g. a rating class. The Kolmogorov-Smirnov-type test builds on the asymptotic normality of counting processes in event history analysis. Right-censoring accommodates for Markov process with more than one no-absorbing state. A simulation study and an example of rating migrations support the usefulness of the test.

Resource author

Rafael WeiƟbach, Holger Dette

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22639

Resource license

Adapt according to the presented license agreement and reference the original author.