The object of this project is to study default dependence and contagion amongst nonagency securitized mortgages in the US over the period 1998-2011. We will use a Cox proportional hazard model in a competing risk framework for default (and prepayment) and a copula model for the dependence amongst individual hazards. Dependence between defaults can occur because of geographical proximity, common economic conditions, which may be of either a local or economy-wide nature, the business cycle, interest rates, etc. We want to quantify the amount of this default dependence and investigate the reasons why such dependence occurs.

Working paper

Contagion in Subprime Mortgage Defaults : a Composite Likelihood Approach