scholarly journals Modeling Repayment Behavior of Consumer Loan in Portfolio across Business Cycle: A Triplet Markov Model Approach

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-11
Author(s):  
Shou Chen ◽  
Xiangqian Jiang
Keyword(s):  
Business Cycles ◽  
Markov Model ◽  
Credit Risk ◽  
Realistic Model ◽  
Model Parameters ◽  
Behavior Model ◽  
Loan Portfolio ◽  
Monte Carlo Algorithms ◽  
Credit Risk Analysis ◽  
Model Approach

With a view to develop a more realistic model for credit risk analysis in consumer loan, our paper addresses the problem of how to incorporate business cycles into a repayment behavior model of consumer loan in portfolio. A particular Triplet Markov Model (TMM) is presented and introduced to describe the dynamic repayment behavior of consumers. The particular TMM can simultaneously capture the phases of business cycles, transition of systematic credit risk of a loan portfolio, and Markov repayment behavior of consumers. The corresponding Markov chain Monte Carlo algorithms of the particular TMM are also developed for estimating the model parameters. We show how the transition of consumers’ repayment states and systematic credit risk of a loan portfolio are affected by the phases of business cycles through simulations.

scholarly journals A Multivariate High-Order Markov Model for the Income Estimation of a Wind Farm

Energies ◽  
2021 ◽  
Vol 14 (2) ◽  
pp. 388
Author(s):  
Riccardo De Blasis ◽  
Giovanni Batista Masala ◽  
Filippo Petroni
Keyword(s):  
Markov Model ◽  
Electricity Market ◽  
Wind Farm ◽  
Central Italy ◽  
High Order ◽  
Distribution Model ◽  
Spot Price ◽  
Model Parameters ◽  
Price Series ◽  
Cross Correlations

The energy produced by a wind farm in a given location and its associated income depends both on the wind characteristics in that location—i.e., speed and direction—and the dynamics of the electricity spot price. Because of the evidence of cross-correlations between wind speed, direction and price series and their lagged series, we aim to assess the income of a hypothetical wind farm located in central Italy when all interactions are considered. To model these cross and auto-correlations efficiently, we apply a high-order multivariate Markov model which includes dependencies from each time series and from a certain level of past values. Besides this, we used the Raftery Mixture Transition Distribution model (MTD) to reduce the number of parameters to get a more parsimonious model. Using data from the MERRA-2 project and from the electricity market in Italy, we estimate the model parameters and validate them through a Monte Carlo simulation. The results show that the simulated income faithfully reproduces the empirical income and that the multivariate model also closely reproduces the cross-correlations between the variables. Therefore, the model can be used to predict the income generated by a wind farm.

scholarly journals A LOW-BIAS SIMULATION SCHEME FOR THE SABR STOCHASTIC VOLATILITY MODEL

2012 ◽  
Vol 15 (02) ◽  
pp. 1250016 ◽  
Author(s):  
BIN CHEN ◽  
CORNELIS W. OOSTERLEE ◽  
HANS VAN DER WEIDE
Keyword(s):  
Stochastic Volatility ◽  
Asset Price ◽  
Realistic Model ◽  
Stochastic Volatility Model ◽  
Model Parameters ◽  
Fixed Income ◽  
Financial Industry ◽  
Volatility Model ◽  
Discretization Schemes ◽  
Simulation Scheme

The Stochastic Alpha Beta Rho Stochastic Volatility (SABR-SV) model is widely used in the financial industry for the pricing of fixed income instruments. In this paper we develop a low-bias simulation scheme for the SABR-SV model, which deals efficiently with (undesired) possible negative values in the asset price process, the martingale property of the discrete scheme and the discretization bias of commonly used Euler discretization schemes. The proposed algorithm is based the analytic properties of the governing distribution. Experiments with realistic model parameters show that this scheme is robust for interest rate valuation.

Absorbing Markov chains for analyzing COVID-19 infections

2021 ◽  
pp. 2250008
Author(s):  
Safaa K. Kadhem ◽  
Sadeq A. Kadhim
Keyword(s):  
Markov Chains ◽  
Markov Model ◽  
Dynamical Model ◽  
Health State ◽  
Random Movement ◽  
Expected Time ◽  
Absorbing Markov Chains ◽  
Death State ◽  
Key Aspects ◽  
Model Approach

Recently, there are many works that proposed modeling approaches to describe the random movement of individuals for COVID-19 infection. However, these models have not taken into account some key aspects for disease such the prediction of expected time of patients remaining at certain health state before entering an absorption state (e.g., exit out of the system for ever such as death state or recovery). Therefore, we propose a dynamical model approach called the absorbing Markov chains for analyzing COVID-19 infections. From this modeling approach, we seek to focus and predict two states of absorption: recovery and death, as these two conditions are considered as important indicators in assessment of the health level. Based on the absorbing Markov model, the study suggested that there is a gradually increase in the predicted death number, while a decrease in the number of recovered individuals.

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