Analytical Framework for Credit Portfolios
Risk Management
2010-08-02 v1 Portfolio Management
Abstract
Analytical, 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.
Keywords
Cite
@article{arxiv.1007.5433,
title = {Analytical Framework for Credit Portfolios},
author = {Mikhail Voropaev},
journal= {arXiv preprint arXiv:1007.5433},
year = {2010}
}
Comments
16 pages, 2 figures