A0459
Title: Structured factor copula models for modeling the default risk of European and U.S. banks
Authors: Audrone Virbickaite - CUNEF Universidad (Spain) [presenting]
Abstract: The joint default probabilities of banks in Europe and the U.S. are modelled using the structured factor copulas. Multi-factor and structured factor models are proposed where the banks in the sample are clustered based on their geographic locations. The variational Bayes approach is employed to estimate copula parameters and a procedure is incorporated to select the best bivariate links among the nodes of the factor copula models. It is found that the dependence structure of bank default is highly correlated in the tail.
