Boston QWAFAFEW Meeting: Tuesday, 16 Jun 2015 – Credit Risk Assessment of Corporate Debt using Sentiment and News

Next Boston QWAFAFEW Meeting: Tuesday, 16 Jun 2015

 

Time: 6:15 PM sharpe
3rd Floor of the Tennis & Racquet Club, 939 Boylston Street

RSVP to hugh@QWAFAFEW.org

 

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Credit Risk Assessment of Corporate Debt using Sentiment and News

 

 

A QWAFAFEW discussion led by:

 

Dan diBartolomeo

 

Abstract

 

Since the Global Financial Crisis of 2007-2009 history has been marked with numerous failings to correctly assess the credit worthiness of financial instruments, financial institutions and governments.   Institutional confidence in the traditional credit rating agencies has been greatly reduced.   One of the largest rating agencies, Standard and Poors, recently agreed to pay a $1.4 billion fine to US regulators for alleged widespread negligence in the ratings of certain complex financial instruments.   As an alternative to the traditional rating process, this work will illustrate the potential use of sentiment statistics from quantified news to calibrate and update the credit risk of corporations and financial institutions in real time.   A modified version of the Merton (1974) contingent claims model from diBartolomeo (2010, 2012) is used to break each corporate debt into two pieces, the first considered riskless debt and the second equity in the issuer.   We utilize news flows and sentiment statistics to frequently update the expected volatility of the assets of the firm and hence the credit risk of the debt in terms of both the probability of default and loss given default.

 

Bio

 

Mr. diBartolomeo is President and founder of Northfield Information Services, Inc. Based in Boston since 1986, Northfield develops quantitative models of financial markets. The firm’s clients include nearly three hundred financial institutions in twenty countries.

 

Dan is a Visiting Professor at the CARISMA Research Center of Brunel University in London. In addition, he serves on the Board of Directors of the Chicago Quantitative Alliance and the advisory board of the International Association of Financial Engineers. He is also an active member of the Financial Management Association, and “QWAFAFEW.” He has been admitted as an expert witness in US federal courts and state courts for litigation matters regarding investment management practices and derivatives.

 

In 2010, Dan received an award from Institutional Investor magazine as one of the forty most influential executives in financial technology in connection with his analytical work that helped uncover the Madoff investment fraud.

 

Mr. diBartolomeo is a director of the American Computer Foundation, and formerly served on the industry liaison committee of the Department of Statistics and Actuarial Sciences at New Jersey Institute of Technology. He continues his several years of service as a judge in the Moscowitz Prize competition, given by the University of California at Berkeley for excellence in academic research on socially responsible investing. He is also vice-president of the Boston Economics Club, and a regional director of the PRMIA organization.

 

Dan has a long list of publications including books, book chapters and research papers in professional journals such as Financial Analyst Journal, Quantitative Finance and Journal of Investing.

 

A detailed listing of publications is available at www.northinfo.com/research.php   

 

 

Please RSVP hugh@QWAFAFEW.org

 

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Please RSVP for all meetings you plan to attend: hugh@QWAFAFEW.org

Guests who do not RSVP may have to wait to enter the meeting, due to space constraints (capacity=100, BFD).

 

Guest fees ($30) can be paid through EMA (check or PayPal, bring receipt) or bitcoin (at address above). We still allow walk-ins (space permitting). The $30 guest fee can be paid by bitcoin, cash or check at the door, no credit cards at the meeting.

 

As always, if you have names or discussion topics, please forward them to any member of the Steerage Committee

 

Questions, comments:

 

 

Steerage Committee

Max Arai

Hugh Crowther (Treasurer)

Dan diBartolomeo

Steve Gaudette

Mark Kritzman

John Minahan

Donna Cool Murphy (Dinners)

Larry Pohlman

Dan Potter

Dan Rie

Evan Schulman

Michael Wilcox

 

The members of the Steerage Committee are responsible for coordinating the program content.

Program suggestions from members are always welcome..

 

RSVP to: hugh@QWAFAFEW.org

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