The project will deal with the models of correlation between interest rate and credit risk and with their sensitivity analysis with respect to input parameters. We will generalize existing models. The generalization will be done in two directions. The first direction will be devoted to modeling of the random part of the interest rate and credit spread when more general processes (for example some types of Levy processes) than Wiener process are used. The second direction will lead to an application of copulas capturing nonlinear correlations. Both of these generalizations will be applied to pricing models, which may be used by financial institutions in financial risk management. The macroeconomic part of the project will further develop Kodera and Málek (2007) results on applications of dynamic IS-LM model. Since the models are deterministic, we expect the probability of default to be a function of interest rates and other variables. (en)
Dynamické modelování korelovaných procesů úrokové míry a kreditního spreadu a dopady na hodnotu bankovního portfolia Oceňování firemních bondů, půjček a tranší v CDO při korelaci úrokové míry a pravděpodobnosti defaultu Makroekonomické dopady korelace ÚR a KR, důsledky asymetrické informace