A Factor Model for the Calculation of Portfolio Credit VaR | Zendy

Ping Li | Zendy; Xiaoxu Wang | Zendy; Haibo Wang | Zendy

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A Factor Model for the Calculation of Portfolio Credit VaR

Author(s) -

Ping Li,

Xiaoxu Wang,

Haibo Wang

Publication year - 2013

Publication title -

procedia computer science

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.334

H-Index - 76

ISSN - 1877-0509

DOI - 10.1016/j.procs.2013.05.079

Subject(s) - computer science , credit risk , credit valuation adjustment , portfolio , equity (law) , copula (linguistics) , value at risk , econometrics , actuarial science , finance , economics , risk management , credit reference , political science , law

In nowadays financial institutions pay more and more attention to credit risk. The default correlation between credit instruments has a fatal influence on credit risk. In this paper, we use the factor copula model to calculate the credit VaR (value at risk) for the target portfolio. We first use the asset value obtained from Merton model to substitute the equity price which is used by most researchers. Then we employ the principal component analysis method to construct a virtual variable representing the macro factor, and estimate the VaR for a credit portfolio

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