Additive Intensity Regression Models in Corporate Default Analysis

Lando, D., Medhat, M., Nielsen, M. S. & Nielsen, S. F. (2013). Additive Intensity Regression Models in Corporate Default Analysis. Journal of Financial Econometrics, 11(3), pp. 443-485. doi: 10.1093/jjfinec/nbs018

[img]
Preview
Text - Accepted Version
Download (5MB) | Preview

Abstract

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.

Item Type: Article
Additional Information: This is a pre-copyedited, author-produced version of an article accepted for publication in Journal of Financial Econometrics following peer review. The version of record Lando, D., Medhat, M., Nielsen, M. S. & Nielsen, S. F. (2013). Additive Intensity Regression Models in Corporate Default Analysis. Journal of Financial Econometrics, 11(3), pp. 443-485. is available online at: https://doi.org/10.1093/jjfinec/nbs018
Uncontrolled Keywords: default risk modeling, Aalen's additive regression model, martingale residual processes
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Finance
URI: http://openaccess.city.ac.uk/id/eprint/17834

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics