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Title: Quantifying credit portfolio losses under multi-factor models
Author: Colldeforns Papiol, Gemma
Ortiz Gracia, Luis
Oosterlee, C. W. (Cornelis W.)
Keywords: Risc (Economia)
Valor (Economia)
Anàlisi factorial
Transformacions de Fourier
Value (Economics)
Factor analysis
Fourier transformations
Issue Date: Oct-2019
Publisher: Gordon and Breach Science Publishers
Abstract: In this work, we investigate the challenging problem of estimating credit risk measures of portfolios with exposure concentration under the multi-factor Gaussian and multi-factor t-copula models. It is well-known that Monte Carlo (MC) methods are highly demanding from the computational point of view in the aforementioned situations. We present efficient and robust numerical techniques based on the Haar wavelets theory for recovering the cumulative distribution function of the loss variable from its characteristic function. To the best of our knowledge, this is the first time that multi-factor t-copula models are considered outside the MC framework. The analysis of the approximation error and the results obtained in the numerical experiments section show a reliable and useful machinery for credit risk capital measurement purposes in line with Pillar II of the Basel Accords.
Note: Versió postprint del document publicat a:
It is part of: International Journal of Computer Mathematics, 2019, vol. 96, num. 11, p. 2135-2156
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ISSN: 0020-7160
Appears in Collections:Articles publicats en revistes (Econometria, Estadística i Economia Aplicada)

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