Hi, all, I am going to take a course of Survival analysis in the math department 'cause I read on this forum that survival analysis is useful in finance and economics. I have tried to find some related topics in the application of survival analysis in finance and economics. I have tried to find some in google, but I cannot find some very specific points. Would you give me some hints on that? Some useful papers or books? Thanks!Yours,Mackinn

the main use I know of is in modeling the time to default. In IE, it is usually the time to failure, in the actuarial arena it is the time to death which is used in life insurance.So, you could search under these words instead. Check out www.defaultrisk.com.In general, it is used to model the reliability of systems. In EE, you have electrical systems, in finance, a first to default would be like a components in a series. check out Darrell Duffie and Ken Singleton's Simulating Correlated Default.

Have alook at all the articles published by David X. Li..u can easily find them in the CreditMetrics web site..

Beyond default/bankruptcy prediction, is there any other application in finance?

I have done a little work using survival analysis to describe the default behavior of a pool of issuers. I eventually gave it up as a dead end (actually, I just didn't feel like pursuing it.) To the best of my knowledge there is little or no work done on using these techniques to describe default risk in the last couple years, as just about everyone is looking at some combination of equity-based structural models, intensity models, and copulas. Commercial banks might use survival analysis, but I wouldn't know for sure.I seem to remember that there was some work done in the area of applying survival analysis to default if you go back to the early 90's, but I can't remember any papers or authors.Honestly, I think the usefulness of survival analysis would be more as a diagnostic or descriptor than as a model of default risk.

Moody's just released a Jumbo MBS model that uses survival analysis almost exclusively.

Cossin and Pirotte "Advanced Credit Risk Analysis" (John Wiley and Sons, Financial Engineering, 2000) has some things about the actuarial approach of credit risk that uses survival analysis. Credit risk seems to be the only fields in finance where they use survival analysis. regards, Anton

Quotecombination of equity-based structural models, intensity models, and copulasUnless I have my terms mixed up, the intensity is the same as the hazard rate function, which is the term from survival analysis. Therefore, intensity models are survival models, just a difference in terminology.btw, intensity models fall under the reduced form branch of default models.

QuoteMoody's just released a Jumbo MBS model that uses survival analysis almost exclusively. is there available info? A link? Thanks.

QuoteOriginally posted by: KOUnless I have my terms mixed up, the intensity is the same as the hazard rate function, which is the term from survival analysis. Therefore, intensity models are survival models, just a difference in terminology.btw, intensity models fall under the reduced form branch of default models.It is true that default intensity is mathematically directly related to the survival function. Default intensity models usually use the language of stopping times, whereas survival analysis, at least what I have seen, uses actuarial language. In some cases this is just a semantic issue, in others it has to do with assumption about the underlying cause of default/mortality. Most of the survival analysis I have seen was applied to biostatistics, so I may be missing something.equity-based modifies structural models, not intensity models or copulas, in my previous post.

chiral3,You said "Moody's just released a Jumbo MBS model that uses survival analysis almost exclusively".Could you please show me where its website is?Anton,Cossin and Pirotte "Advanced Credit Risk Analysis" (John Wiley and Sons, Financial Engineering, 2000) has some things about the actuarial approach of credit risk that uses survival analysis. Could you please tell me which chapters or pages I can see?

QuoteOriginally posted by: AnthisBeyond default/bankruptcy prediction, is there any other application in finance?I've seen survival analysis used in empirical analysis of limit order data to estimate models for execution probabilties. There was a fairly recent paper with Andy Lo as a co-author that did exactly this. There is also some literature using these models looking at the survival of mutual funds conditional on past returns, fund age and other stuff. If I remember correctly, one of the guys involved in this work was Allan Timmerman at UCSD.richg.