EconStor >
Deutsche Bundesbank, Forschungszentrum, Frankfurt am Main >
Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank >

Please use this identifier to cite or link to this item:
Title:Does modeling framework matter? A comparative study of structural and reduced-form models PDF Logo
Authors:Gündüz, Yalin
Uhrig-Homburg, Marliese
Issue Date:2011
Series/Report no.:Discussion Paper Series 2: Banking and Financial Studies 2011,05
Abstract:This study provides a rigorous empirical comparison of structural and reduced-form credit risk frameworks. As major difference we focus on the discriminative modeling of default time. In contrast to previous literature, we calibrate both approaches to bond and equity prices. By using same input data, applying comparable estimation techniques, and assessing the out-of-sample prediction quality on same time series of CDS prices we are able to judge whether empirically the model structure itself makes an important difference. Interestingly, the models' prediction power is quite close on average. Still, the reduced-form approach outperforms the structural for investment-grade names and longer maturities.
Subjects:credit risk
structural models
reduced-form models
default intensity
stationary leverage
credit default swaps
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank

Files in This Item:
File Description SizeFormat
659408813.pdf295.71 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.