Journal of Credit Risk

Welcome to the March 2018 issue of The Journal of Credit Risk. In this issue we have three papers, covering method-of-moment approaches, consumer credit scoring and interest rate swaps.

The first paper is by Christoph Frei and Marcus Wunsch. Entitled “Moment estimators for autocorrelated time series and their application to default correlations", in this paper the authors propose a new estimator that adjusts to the problems of autocorrelation and the shortness of the time series, thus eliminating a significant portion of the bias observed with classical estimators in method-of-moment approaches. The adjustment is based on convergence and approximation results for general autocorrelated time series, and it is easily implementable and nonparametric.

Our second paper, “A copula approach to CVA for swaps under wrong-way risk”, is by Jakub Černý and Jiří Witzany. This paper deals with the credit valuation adjustment of interest rate swap contracts in the presence of an adverse dependence between the default time and interest rates: so-called wrong-way risk.

“Nonlinear relationships in a logistic model of default for a high-default installment portfolio” by Christian Lohmann and Thorsten Ohliger is our third and final paper. This paper uses data on consumer credit along with generalized additive models to analyze nonlinear relationships and their effect on predicting the probability of default in the context of consumer credit scoring.