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News & Activities
Friday, November 10, 4:00-5:00 PM, KAP249
Henry Schellhorn,
IMD and Claremont Graduate University
Title: Couterparty Risk in a Network Economy
Abstract:
We develop a structural model of credit risk in a network economy, where any firm can lend to
any other firm, so that each firm is subject to counterparty risk either from direct borrowers or from
remote firms in the network. This model takes into account the role of each firm’s cash management.
We show that we can obtain a semi-closed form formula for the price of debt and equity when cash
accounts are buffers to bankruptcy risk. As in other structural models, the strategic bankruptcy decision
of shareholders drives credit spreads, and differentiates debt from equity. Cash flow risk also causes credit
risk interdependencies between firms. Our model applies to the case where not only financial flows but also
operations are dependent across firms. We use queueing theory to obtain our semi-closed form formulae
in steady state. We perform a simplified implementation of our model to the US automotive industry
and show how we infer the impact on a supplier’s credit spreads of revenue changes in a manufacturer
or even in a large car dealer.
paper (PDF)
Friday, November 17, KAP 116 4:30 PM
Backgammon Tournament
email uscsiam@usc.edu to register
Information (PDF)
Friday, April 21, KAP 249 3:30-4:30 PM
Muhammet Ali Can, Jet Propulsion Laboratory
California Institute of Technology
Title: Quantum Computation: An Introduction
Monday, April 24, 3:30-4:30 PM, KAP249
Victor L. Piterbarg, Quantitative Finance Analyst,
Bank of America Securities
Title: Modeling Credit Derivatives: A Practitioner's View
Abstract:
Credit derivatives are financial instruments that allow one to take a
view on the credit risk associated with one or more reference assets.
The market for these products is relatively recent -- first credit
derivatives only begun trading in the mid-1990's. The relative novelty
of these products, along with some unique features, provide for some
interesting challenges in terms of constructing models for pricing them.
In this talk, I will discuss some pragmatic approaches, currently used
in practice, for modeling and pricing credit derivatives.
USC SIAM Chapter are going to organize a backgammon tournament soon
"How to become a member of USC SIAM Student Chapter?"
Any USC student is eligible to be a member of SIAM Student Chapter at USC. If you want to be a member,
contact us by providing the following information:
- Your USC email address
- Your mailing address
- Your major/department, and whether you are a graduate or undergraduate student
Benefits of Student Membership
http://www.siam.org/students/memberships.php
For all past activities of USC SIAM Student Chapter see our Calendar
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