Open AccessPortfolio Risk and Dependence Modeling
Author(s) -
Arsalan Azamighaimasi
Publication year - 2012
Publication title -
international journal of financial research
Language(s) - English
Resource type - Journals
eISSN - 1923-4031
pISSN - 1923-4023
DOI - 10.5430/ijfr.v4n1p151
Subject(s) - copula (linguistics) , portfolio , econometrics , multivariate t distribution , gaussian , model risk , multivariate statistics , portfolio optimization , computer science , tail dependence , credit risk , multivariate normal distribution , economics , actuarial science , financial economics , risk management , physics , machine learning , finance , quantum mechanics
This paper has considered portfolio credit risk with a focus on two approaches, the factor model, and copula model. We have reviewed two models with emphasis on the joint default probably. The copula function describes the dependence structure of a multivariate random variable, in this paper, it used as a practical to simulation of generate portfolio with different copula, and we only used Gaussian and t–copula case. We generated portfolio default distributions and studied the sensitivity of commonly used risk measures with respect to the approach in modeling the dependence structure of the portfolio