The credit risk(+) model with general sector correlations

We consider an enhancement of the credit risk+ model to incorporate correlations between sectors. We model the sector default rates as linear combinations of a common set of independent variables that represent macro-economic variables or risk factors. We also derive the formula for exact VaR contributions at the obligor level.

An analytical model for capacity evaluation of VoIP on HCCA and TCP file transfers over EDCA in an IEEE 802.11e WLAN

In the context of the IEEE 802.11e standard for WLANs, we provide an analytical model for obtaining the maximum number of VoIP calls that can be supported on HCCA, such that the delay QoS constraint of the accepted calls is met, when TCP downloads are coexistent on EDCA. In this scenario, we derive the TCP download throughput by using an analytical model for the case where only TCP sessions are present in the WLAN. We show that the analytical model for combined voice and TCP transfers provides accurate results in comparison with simulations (using ns-2).

An analytical model for the capacity estimation of combined VoIP and TCP file transfers over EDCA in an IEEE 802.11e WLAN

In this paper we develop and numerically explore the modeling heuristic of using saturation attempt probabilities as state dependent attempt probabilities in an IEEE 802.11e infrastructure network carrying packet telephone calls and TCP controlled file downloads, using Enhanced Distributed Channel Access (EDCA). We build upon the fixed point analysis and performance insights in [1]. When there are a certain number of nodes of each class contending for the channel (i.e., have nonempty queues), then their attempt probabilities are taken to be those obtained from saturation analysis for that number of nodes. Then we model the system queue dynamics at the network nodes. With the proposed heuristic, the system evolution at channel slot boundaries becomes a Markov renewal process, and regenerative analysis yields the desired performance measures.The results obtained from this approach match well with ns2 simulations. We find that, with the default IEEE 802.11e EDCA parameters for AC 1 and AC 3, the voice call capacity decreases if even one file download is initiated by some station. Subsequently, reducing the voice calls increases the file download capacity almost linearly (by 1/3 Mbps per voice call for the 11 Mbps PHY).

Application of nonlinear filtering to credit risk

Merton's model views equity as a call option on the asset of the firm. Thus the asset is partially observed through the equity. Then using nonlinear filtering an explicit expression for likelihood ratio for underlying parameters in terms of the nonlinear filter is obtained. As the evolution of the filter itself depends on the parameters in question, this does not permit direct maximum likelihood estimation, but does pave the way for the `Expectation-Maximization' method for estimating parameters. (C) 2010 Elsevier B.V. All rights reserved.

New Ventures’ influence on the Growth of SME Employment, Production and Exports in India: Does Institutional Credit matter?

New ventures are considered to be a major source of small firm growth. In Indian context the contribution of new ventures in terms of new employment, production and exports has largely remained unexplored. It is equally important and unexplored, the significance of the contribution of bank credit to the growth of new ventures in India. This paper is an attempt to throw light on these two aspects. The research is based on secondary data of the liberalized period provided by Ministry of Micro, Small and Medium Enterprises, Government of India and Reserve Bank of India. To analyze the influence of bank credit growth on new ventures and the influence of new ventures on growth of additional employment, additional production and additional exports, we used a Bi-Variate Vector Auto Regression. Based on the model generated, Granger causality tests are conducted to obtain the results. The study found that rate of growth of bank credit causes the number of new ventures, implying any increase in the rate of growth of bank credit will be beneficial to the growth of new ventures. The study also concluded that new ventures are not causing the growth of additional employment or additional production. However new ventures cause the growth of additional exports. This is reasonable as entrepreneurs start their new ventures with minimum possible employment and relatively low rate of capacity utilization and they come up to take advantage of the process of globalization by catering to the international market.

Aggregate download throughput for TCP-controlled long file transfers in a WLAN with multiple STA-AP association rates

We consider several WLAN stations associated at rates r(1), r(2), ... r(k) with an Access Point. Each station (STA) is downloading a long file from a local server, located on the LAN to which the Access Point (AP) is attached, using TCP. We assume that a TCP ACK will be produced after the reception of d packets at an STA. We model these simultaneous TCP-controlled transfers using a semi-Markov process. Our analytical approach leads to a procedure to compute aggregate download, as well as per-STA throughputs, numerically, and the results match simulations very well. (C) 2012 Elsevier B.V. All rights reserved.

Pricing credit derivatives

The financial crisis set off by the default of Lehman Brothers in 2008 leading to disastrous consequences for the global economy has focused attention on regulation and pricing issues related to credit derivatives. Credit risk refers to the potential losses that can arise due to the changes in the credit quality of financial instruments. These changes could be due to changes in the ratings, market price (spread) or default on contractual obligations. Credit derivatives are financial instruments designed to mitigate the adverse impact that may arise due to credit risks. However, they also allow the investors to take up purely speculative positions. In this article we provide a succinct introduction to the notions of credit risk, the credit derivatives market and describe some of the important credit derivative products. There are two approaches to pricing credit derivatives, namely the structural and the reduced form or intensity-based models. A crucial aspect of the modelling that we touch upon briefly in this article is the problem of calibration of these models. We hope to convey through this article the challenges that are inherent in credit risk modelling, the elegant mathematics and concepts that underlie some of the models and the importance of understanding the limitations of the models.

Modeling the effect of transmission errors on TCP controlled transfers over infrastructure 802.11 wireless LANs

There have been several studies on the performance of TCP controlled transfers over an infrastructure IEEE 802.11 WLAN, assuming perfect channel conditions. In this paper, we develop an analytical model for the throughput of TCP controlled file transfers over the IEEE 802.11 DCF with different packet error probabilities for the stations, accounting for the effect of packet drops on the TCP window. Our analysis proceeds by combining two models: one is an extension of the usual TCP-over-DCF model for an infrastructure WLAN, where the throughput of a station depends on the probability that the head-of-the-line packet at the Access Point belongs to that station; the second is a model for the TCP window process for connections with different drop probabilities. Iterative calculations between these models yields the head-of-the-line probabilities, and then, performance measures such as the throughputs and packet failure probabilities can be derived. We find that, due to MAC layer retransmissions, packet losses are rare even with high channel error probabilities and the stations obtain fair throughputs even when some of them have packet error probabilities as high as 0.1 or 0.2. For some restricted settings we are also able to model tail-drop loss at the AP. Although involving many approximations, the model captures the system behavior quite accurately, as compared with simulations.