Academy of Mathematics and Systems Science, CAS
Colloquia & Seminars
| | Speaker: | 王若度 博士，University of Waterloo , Canada
| | Inviter: | 王彬 博士 | Title:
| An Axiomatic Theory for Rating Structured Finance Securities | Time & Venue:
| 2019.7.8 10:30 N620 | Abstract:
| Credit rating is ubiquitous in all forms of financial products, and in particular structured products. In view of its fundamental importance, this paper proposes an axiomatic approach for credit rating. Motivated by empirical observations on the Bloomberg CDO data sets from 1997 to 2018, we formally introduce the phenomenon of tranche exploitation, as well as two axioms: self-consistency and scenario-relevance. We proceed to show that the Probability of Default criterion used by Standard and Poor's and Fitch is not self-consistent and admits tranche exploitation, where as the Expected Loss criterion used by Moody's is self-consistent and does not admit tranche exploitation. As one of the main theoretical results, we show that a self-consistent rating criterion is characterized by a rating measure which admits a Choquet integral representation. Based on the theory, we propose some novel forms of rating criteria that can be used for practice. This talk is based on joint work with Nan Guo, Steven Kou and Bin Wang.
Dr. Ruodu Wang is University Research Chair and Associate Professor of Actuarial Science at the University of Waterloo in Canada. He received his PhD in Mathematics (2012) from the Georgia Institute of Technology, after completing his Bachelor's (2006) and Master's (2009) degrees at Peking University. His research interests include Quantitative Finance, Actuarial Science, Operations Research, and Risk Management, and has published over 50 papers in leading journals in the respective areas. He holds editorial positions of leading academic journals in Actuarial Science, including Co-Editor of ASTIN Bulletin - The Journal of the International Actuarial Association and Co-Editor of the European Actuarial Journal. He received one of Canada's 125 Discovery Accelerator Supplement Awards from the Natural Sciences and Engineering Research Council of Canada in 2018, and is an affiliated member of RiskLab at ETH Zurich. | |
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