Hybrid Monte Carlo methods in credit risk management

Del Chicca Lucia () and Larcher Gerhard ()
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Del Chicca Lucia: Institut für Finanzmathematik, Universität Linz, Altenbergerstraße 69, Science Park Bauteil 2, A-4040 Linz, Austria
Larcher Gerhard: Institut für Finanzmathematik, Universität Linz, Altenbergerstraße 69, Science Park Bauteil 2, A-4040 Linz, Austria

Monte Carlo Methods and Applications, 2014, vol. 20, issue 4, 245-260

Abstract: In this paper we analyze and compare the use of Monte Carlo, quasi-Monte Carlo and hybrid Monte Carlo methods in the credit risk management system “Credit Metrics” by J. P. Morgan. We show that hybrid sequences, used suitably for simulations, perform better, in many relevant situations, than pure Monte Carlo and pure quasi-Monte Carlo methods, and they only rarely perform worse than these methods.

Keywords: Hybrid sequences; quasi-Monte Carlo methods; risk management (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:mcmeap:v:20:y:2014:i:4:p:245-260:n:3

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DOI: 10.1515/mcma-2014-0004

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