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The credit risk + model with general sector correlations

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  • Amogh Deshpande
  • Srikanth Iyer

Abstract

We consider an enhancement of the credit risk + model to incorporate correlations between sectors. We model the sector default rates as linear combinations of a common set of independent variables that represent macro-economic variables or risk factors. We also derive the formula for exact VaR contributions at the obligor level. Copyright Springer-Verlag 2009

Suggested Citation

  • Amogh Deshpande & Srikanth Iyer, 2009. "The credit risk + model with general sector correlations," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 17(2), pages 219-228, June.
    • Handle: RePEc:spr:cejnor:v:17:y:2009:i:2:p:219-228
    DOI: 10.1007/s10100-009-0084-4
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    References listed on IDEAS

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    1. Gordy, Michael B., 2002. "Saddlepoint approximation of CreditRisk+," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1335-1353, July.
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    Cited by:

    1. Devjak Srečko, 2018. "Modeling of Cash Flows from Nonperforming Loans in a Commercial Bank," Naše gospodarstvo/Our economy, Sciendo, vol. 64(4), pages 3-9, December.
    2. Papalamprou, Konstantinos & Antoniou, Paschalis, 2019. "Estimation of capital requirements in downturn conditions via the CBV model: Evidence from the Greek banking sector," Operations Research Perspectives, Elsevier, vol. 6(C).
    3. Amogh Deshpande, 2014. "Comparing the Value at Risk Performance of the CreditRisk + and its Enhancement: A Large Deviations Approach," Methodology and Computing in Applied Probability, Springer, vol. 16(4), pages 1009-1023, December.
    4. Petr Hájek, 2012. "Credit rating analysis using adaptive fuzzy rule-based systems: an industry-specific approach," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 20(3), pages 421-434, September.

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