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Capital for concentrated credit portfolios
Journal of Risk Management in Financial Institutions, 2015Most credit portfolios contain obligor concentration risk and yet international bank regulatory capital rules and many industry models assume perfect diversification. Multiple methods are available to calculate the approximate capital needs of a concentrated credit portfolio, but many of these involve advanced mathematical arguments and substantial ...
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NORTA for portfolio credit risk
Annals of Operations Research, 2018We use NORTA (NORmal To Anything) to enhance normal credit-risk factor settings in modeling common risk factors and capturing contagion effects. NORTA extends the multivariate Normal distribution in that it enables the simulation of a random vector with arbitrary and known marginals and correlation structure.
Nabil Channouf +3 more
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Financial literacy and consumer credit portfolios [PDF]
Journal of Banking & Finance, 2013 We use survey data from a sample of UK households to analyse the relation ship between financialliteracy and consumer credit portfolios.We show that individ uals who borrow on consumer credit exhibit worse financial literacy than those who do not.Borrowers with poor financialliteracy hold higher shares of high cost credit (such as home collected credit,
Richard Disney, John Gathergood
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Saddlepoint Approximation for Credit Portfolios
2018We consider a portfolio of loans or bonds, where the loan borrowers or bond issuers may fail to meet the promised cashflows as stated in the loan contracts or bond indentures. These payment defaults lead to credit losses to the holder of the portfolio of these credit instruments or names (loans or bonds).
Wendong Zheng, Yue Kuen Kwok
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Portfolio credit-risk optimization
Journal of Banking & Finance, 2012Abstract This paper evaluates several alternative formulations for minimizing the credit risk of a portfolio of financial contracts with different counterparties. Credit risk optimization is challenging because the portfolio loss distribution is typically unavailable in closed form.
Ian Iscoe +4 more
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2017
So far we have focused on methods how to properly measure credit risk and approve individual loan transactions. But even if this process is under control and loan underwriting is going well, a prudent bank management must ask the question; “When is enough enough?” Can the bank portfolio grow without limitations, or is there a limit?
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So far we have focused on methods how to properly measure credit risk and approve individual loan transactions. But even if this process is under control and loan underwriting is going well, a prudent bank management must ask the question; “When is enough enough?” Can the bank portfolio grow without limitations, or is there a limit?
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LARGE PORTFOLIO CREDIT RISK MODELING
International Journal of Theoretical and Applied Finance, 2007A model for large portfolio credit risk is developed by using results on the asymptotic behavior of stochastic networks. An efficient pricing technique is proposed using a newly-introduced quadrature algorithm. Accurate calibration to iTraxx tranche spreads is demonstrated.
MARK H. A. DAVIS +1 more
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Sufficient Diversification in Credit Portfolios
The Journal of Portfolio Management, 2002How much diversification is required in an investment-grade credit portfolio to achieve a desired level of risk relative to a broad credit benchmark? Two approaches to optimal portfolio structuring address this fundamental question from different viewpoints.
Vadim Konstantinovsky +2 more
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Optimising a bank's credit portfolio
International Journal of Applied Management Science, 2016The purpose of this paper is to show the practical application of linear programming and logistic regression models in the formulation of an optimal bank credit policy. Firstly, we formulate a linear programming model and develop a solution (using the simplex algorithm) that optimally allocates funds, where a financial institution is facing the problem
Michael Kofi Asare +2 more
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Stress Testing in Credit Portfolio Models
SSRN Electronic Journal, 2013As, in light of the recent financial crises, stress tests have become an integral part of risk management and banking supervision, the analysis and understanding of risk model behaviour under stress has become ever more important. In this paper, we present a general approach to implementing stress scenarios in a multi-factor credit portfolio model and ...
Michael Kalkbrener, Ludger Overbeck
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