Reduced-form models of correlated default timing: a systematic literature review
Journal of Accounting Literature
ISSN: 0737-4607
Article publication date: 14 December 2022
Issue publication date: 12 January 2023
Abstract
Purpose
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/approach
A 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.
Findings
The 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/value
This is the first paper systematically reviewing the research on reduced-form models of default timing.
Keywords
Acknowledgements
The authors would like to thank Professor Tak Kuen Siu, Professor Tom Smith and Associate Professor Jiwook Jang for their helpful comments and suggestions. The authors would also like to sincerely thank the reviewers for their valuable and insightful comments. This paper is based on one of the chapters in a PhD thesis by the first author, and the first author acknowledges the International Macquarie University Research Excellence Scholarship.
Citation
Nguyen, H. and Zhou, X. (2023), "Reduced-form models of correlated default timing: a systematic literature review", Journal of Accounting Literature, Vol. 45 No. 1, pp. 190-205. https://doi.org/10.1108/JAL-08-2022-0091
Publisher
:Emerald Publishing Limited
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