In financial context, the majority of studies in econophysics are dealing with market risk, since many concepts in statistical physics are directly applicable. A type of risk that is fundamentally different from the other types of financial risks discussed in the introduction is represented by credit risk [123–127]. Modeling credit risk, i.e., the risk that an obligor fails to make a promised payment, is much more complex. As discussed in the previous chapters, the risk of a financial asset, e.g., a stock, is often expressed by its standard deviation. Due to the nearly symmetric shape of the return distribution of, e.g., stocks, by this definition, large positive returns are considered just as risky as large negative returns. An investor who uses volatility as a risk measure acts risk averse. However, due to the asymmetric shape of a credit portfolio's loss distribution, the variance is not suitable as a risk measure in this context.


Asset Price Credit Risk Default Risk Default Probability Geometric Brownian Motion 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Copyright information

© Vieweg+Teubner Verlag | Springer Fachmedien Wiesbaden GmbH 2011

Authors and Affiliations

  • Michael C. Münnix

There are no affiliations available

Personalised recommendations