Particle MCMC in forecasting frailty correlated default models with expert opinion

Predicting corporate default risk has long been a crucial topic in the finance field, as bankruptcies impose enormous costs on market participants as well as the economy as a whole. This paper aims to forecast frailty correlated default models with subjective judgements on a sample of U.S. public non-financial firms spanning January 1980-June 2019. We consider a reduced-form model and adopt a Bayesian approach coupled with the Particle Markov Chain Monte Carlo (Particle MCMC) algorithm to scruti...