Journal of Credit Risk
ISSN:
1744-6619 (print)
1755-9723 (online)
Editor-in-chief: Linda Allen and Jens Hilscher
An approximation for credit portfolio losses
Rüdiger Frey, Monika Popp, Stefan Weber
Abstract
ABSTRACT
This paper discusses a new approximation for the loss distribution in mixture models of portfolio credit risk, based on a normal approximation to the conditional loss distribution and the Berry-Esseen inequality. Applications to the risk management for credit portfolios and to the pricing of multi-name credit derivatives in factor copula models are discussed. A numerical case study shows that the method provides substantially more accurate results than the standard Vasicek approximation, while being at the same time computationally less expensive than standard Monte Carlo algorithms.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net