Capital allocation for credit portfolios with kernel estimators

DOI10.1080/14697680802620599MaRDI QIDQ3645199zbMATH OpenOpenAlexFDO

Authors Dirk Tasche

Publication date 16 November 2009

Published in Quantitative Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/math/0612470

zbMATH Keywords

copulasapplications to default riskcorporate risk managementapplications to credit risk

Mathematics Subject Classification ID

Density estimation (62G07) Statistical methods; risk measures (91G70) Credit risk (91G40)

Abstract: Determining contributions by sub-portfolios or single exposures to portfolio-wide economic capital for credit risk is an important risk measurement task. Often economic capital is measured as Value-at-Risk (VaR) of the portfolio loss distribution. For many of the credit portfolio risk models used in practice, the VaR contributions then have to be estimated from Monte Carlo samples. In the context of a partly continuous loss distribution (i.e. continuous except for a positive point mass on zero), we investigate how to combine kernel estimation methods with importance sampling to achieve more efficient (i.e. less volatile) estimation of VaR contributions.

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Cites work

• AN AXIOMATIC APPROACH TO CAPITAL ALLOCATION
• Importance sampling for portfolio credit risk

Cited in

(16)

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• Monte Carlo methods for value-at-risk and conditional value-at-risk: a review
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• Monte Carlo Methods for Economic Capital
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• On the computation of the capital multiplier in the Fortis credit economic capital model
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