Analytical Framework for Credit Portfolios
AbstractAnalytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures (standard deviation, VaR and Expected Shortfall) as well as allocation of risk down to individual transactions. The underlying model is the industry standard multi-factor Merton-type model with arbitrary valuation function at horizon (in contrast to the simplistic default-only case). High accuracy of the proposed analytical technique is demonstrated by benchmarking against Monte Carlo simulations.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1007.5433.
Date of creation: Jul 2010
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-06 (All new papers)
- NEP-BAN-2010-08-06 (Banking)
- NEP-RMG-2010-08-06 (Risk Management)
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