A1764
Title: Joint estimation of parameters of mortgage portfolio and the factor process
Authors: Jaroslav Dufek - Institute of Information Theory and Automation (Czech Republic) [presenting]
Martin Smid - Institute of Information Theory and Automation (Czech Republic)
Abstract: A factor model for LGD (loss given default) and PD (probability of default) of mortgage portfolio based on KVM approach has been previously proposed. An evolution of factors by a VECM model has also been fitted; however, the parameters of a portfolio are taken as fixed instead of estimation. We propose a technique of a joint estimation of VECM and portfolio parameters in particular MLE function is defined; asymptotic properties are discussed. We propose a technique for joint estimation of the VECM and the portfolio parameters. In particular, MLE function is defined and its asymptotic properties are discussed. Finally, our technique is applied to US market data.
