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Reduced-form models of correlated default timing: a systematic literature review

Reduced-form models of correlated default timing: a systematic literature review This paper aims to provide an overview, a classification of existing research groups for correlated default models using a reduced-form method and an identification of future research opportunities in the field.Design/methodology/approachA systematic literature review is used for the identification, selection, evaluation and synthesis of relevant literature using keywords regarding the reduced-form default models in the Web of Science database. The authors also add articles from cross-referencing and expert recommendations to the literature. HistCite™ program is used to generate a citation map of the literature.FindingsThe results show that reduced-form correlated default risk models are developing towards modelling credit risk with both observable and unobservable variables. The frailty correlated default model at the firm level is still a potential research field.Originality/valueThis is the first paper systematically reviewing the research on reduced-form models of default timing. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting Literature Emerald Publishing

Reduced-form models of correlated default timing: a systematic literature review

Journal of Accounting Literature , Volume 45 (1): 16 – Jan 12, 2023

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0737-4607
eISSN
2452-1469
DOI
10.1108/jal-08-2022-0091
Publisher site
See Article on Publisher Site

Abstract

This paper aims to provide an overview, a classification of existing research groups for correlated default models using a reduced-form method and an identification of future research opportunities in the field.Design/methodology/approachA systematic literature review is used for the identification, selection, evaluation and synthesis of relevant literature using keywords regarding the reduced-form default models in the Web of Science database. The authors also add articles from cross-referencing and expert recommendations to the literature. HistCite™ program is used to generate a citation map of the literature.FindingsThe results show that reduced-form correlated default risk models are developing towards modelling credit risk with both observable and unobservable variables. The frailty correlated default model at the firm level is still a potential research field.Originality/valueThis is the first paper systematically reviewing the research on reduced-form models of default timing.

Journal

Journal of Accounting LiteratureEmerald Publishing

Published: Jan 12, 2023

Keywords: Reduced-form model; Default risk; Corporate default; Frailty; Hidden factors; Systematic literature review

References