| Zitatschlüssel |
BKW-2004-Incorporating-Severity-Variations-into-Credit-Risk |
| Autor |
Peter Bürgisser and Alexandre Kurth and Armin Wagner |
| Buchtitel |
Innovations in Risk Management |
| Seiten |
533-567 |
| Jahr |
2004 |
| Herausgeber |
P. Jorion |
| Verlag |
Incisive Media Investments Limited |
| Serie |
Seminal Papers from the Journal of Risk |
| Zusammenfassung |
We present an approach to model credit risk that incorporates the risk of counterparty default and the risk of devaluation of the collateral. The framework is based on a two-dimensional segmentation by industry and collateral type. The systematic effects in both risk drivers are taken into account by volatilities within, and by correlations between the segments. We derive a simple formula for the variance of the loss distribution and describe an algorithm to compute this distribution. Moreover, we show that in the limit of a large portfolio, the loss distribution directly mirrors the assumptions on the economy and depends on the portfolio structure only through the relative expected loss weights. |
