2009/11/02 by Voropaev, Mikhail
#Computational Finance (q-fin.CP) #FOS: Economics and business #Portfolio Management (q-fin.PM) #Risk Management (q-fin.RM)
paper · doi:10.48550/arxiv.0911.0223
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.