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Credit risk for large portfolios of green and brown loans: extending the ASRF model

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  • Alessandro Ramponi
  • Sergio Scarlatti

Abstract

We propose a credit risk model for portfolios composed of green and brown loans, extending the ASRF framework via a two-factor copula structure. Systematic risk is modeled using potentially skewed distributions, allowing for asymmetric creditworthiness effects, while idiosyncratic risk remains Gaussian. Under a non-uniform exposure setting, we establish convergence in quadratic mean of the portfolio loss to a limit reflecting the distinct characteristics of the two loan segments. Numerical results confirm the theoretical findings and illustrate how value-at-risk is affected by portfolio granularity, default probabilities, factor loadings, and skewness. Our model accommodates differential sensitivity to systematic shocks and offers a tractable basis for further developments in credit risk modeling, including granularity adjustments, CDO pricing, and empirical analysis of green loan portfolios.

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  • Alessandro Ramponi & Sergio Scarlatti, 2025. "Credit risk for large portfolios of green and brown loans: extending the ASRF model," Papers 2506.12510, arXiv.org.
    • Handle: RePEc:arx:papers:2506.12510
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