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On the Parameterization of the CreditRisk+ Model for Estimating Credit Portfolio Risk
Year Of Publication: 2007
Month Of Publication: February
Pages: 24
Download Count: 315
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Comment Num: 0
Language: EN
Source:
Who Can Read: Free
Date: 9-27-2007
Publisher: Administrator
Summary
The Credit Risk+ model is one of the industry standards for estimating the creditdefault risk for a portfolio of credit loans. The natural parameterization of this modelrequires the default probability to be apportioned using a number of (nonnegative)factor loadings. However, in practice only default correlations are often availablebut not the factor loadings. In this paper we investigate how to deduce the factorloadings from a given set of default correlations. This is a novel approach and itrequires the nonnegative factorization of a positive semi-definite matrix which is byno means trivial. We also present a numerical optimization algorithm to achievethis.
Author(s)
Vandendorpe, Antoine Sign in to follow this author
Ho, Ngoc-Diep Sign in to follow this author
Vanduffel, Steven Sign in to follow this author
Van Dooren, Paul Sign in to follow this author
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