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Comparing the Value at Risk Performance of the CreditRisk +  and its Enhancement: A Large Deviations Approach
Company: Methodology and Computing in Applied Probability
Company Url: Click here to open
Year Of Publication: 2013
Month Of Publication: July
Resource Link: Click here to open
Download Count: 0
View Count: 1116
Comment Num: 0
Language: English
Source: article
Who Can Read: Free
Date: 7-30-2013
Publisher: Administrator
Summary
Unlike the standard CR?+?, the 2-CR?+? model is formulated to allow correlation between sectoral default rates through dependence on a common set of macroeconomic variables. Furthermore the default rates for a 2-CR?+? are distributed according to a general univariate distribution which is in stark contrast to the uniformly Gamma distributed sectoral default rates in the CR?+?. In particular we show that the 2-Stage CR?+? definitely produces higher VaR than the CR?+? for a particular class of a credit portfolio which we term as a “balanced” credit portfolio. We support this statistical risk analysis through numerical examples.
Author(s)
Deshpande, Amogh Sign in to follow this author
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