The two defaults scenario for stressing credit portfolio loss distributions
| Autor: | Dirk Tasche |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2016 |
| Předmět: |
joint default probability
Computer science lcsh:Risk in industry. Risk management Monte Carlo method 91G10 91G40 FOS: Economics and business Stress test lcsh:Finance lcsh:HG1-9999 Random loss Econometrics ddc:330 Scenario analysis Event (probability theory) CreditRisk+ scenario analysis lcsh:HD61 Distribution (mathematics) q-fin.RM Credit portfolio Risk Management (q-fin.RM) Portfolio Conditioning stress test Default Quantitative Finance - Risk Management |
| Zdroj: | Journal of Risk and Financial Management; Volume 9; Issue 1; Pages: 1 Journal of Risk and Financial Management, Vol 9, Iss 1, p 1 (2015) |
| Popis: | The impact of a stress scenario of default events on the loss distribution of a credit portfolio can be assessed by determining the loss distribution conditional on these events. While it is conceptually easy to estimate loss distributions conditional on default events by means of Monte Carlo simulation, it becomes impractical for two or more simultaneous defaults as then the conditioning event is extremely rare. We provide an analytical approach to the calculation of the conditional loss distribution for the CreditRisk+ portfolio model with independent random loss given default distributions. The analytical solution for this case can be used to check the accuracy of an approximation to the conditional loss distribution whereby the unconditional model is run with stressed input probabilities of default (PDs). It turns out that this approximation is unbiased. Numerical examples, however, suggest that the approximation may be seriously inaccurate but that the inaccuracy leads to overestimation of tail losses and hence the approach errs on the conservative side. 20 pages, 1 figure, 2 tables |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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