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A semi-analytical method for VaR and credit exposure analysis

Author

Listed:
  • Ben De Prisco
  • Ian Iscoe
  • Alexander Kreinin
  • Ahmed Nagi

Abstract

In this paper, we discuss new analytical methods for computing Value-at-Risk (VaR) and a credit exposure profile. Using a Monte Carlo simulation approach as a benchmark, we find that the analytical methods are more accurate than RiskMetrics delta VaR, and are more efficient than Monte Carlo, for the case of fixed income securities. However the accuracy of the method deteriorates when applied to a portfolio of barrier options. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Ben De Prisco & Ian Iscoe & Alexander Kreinin & Ahmed Nagi, 2007. "A semi-analytical method for VaR and credit exposure analysis," Annals of Operations Research, Springer, vol. 152(1), pages 23-47, July.
    • Handle: RePEc:spr:annopr:v:152:y:2007:i:1:p:23-47:10.1007/s10479-006-0123-7
    DOI: 10.1007/s10479-006-0123-7
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    Cited by:

    1. Breuer, Thomas & Jandačka, Martin & Mencía, Javier & Summer, Martin, 2012. "A systematic approach to multi-period stress testing of portfolio credit risk," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 332-340.

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