Calibrating the CreditRisk + Model at Different Time Scales and in Presence of Temporal Autocorrelation †

Jacopo Giacomelli and Luca Passalacqua
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Jacopo Giacomelli: SACE S.p.A., Piazza Poli 42, 00187 Rome, Italy
Luca Passalacqua: Department of Statistics, Sapienza University of Rome, Viale Regina Elena 295, 00161 Rome, Italy

Mathematics, 2021, vol. 9, issue 14, 1-30

Abstract: The CreditRisk + model is one of the industry standards for the valuation of default risk in credit loans portfolios. The calibration of CreditRisk + requires, inter alia, the specification of the parameters describing the structure of dependence among default events. This work addresses the calibration of these parameters. In particular, we study the dependence of the calibration procedure on the sampling period of the default rate time series, that might be different from the time horizon onto which the model is used for forecasting, as it is often the case in real life applications. The case of autocorrelated time series and the role of the statistical error as a function of the time series period are also discussed. The findings of the proposed calibration technique are illustrated with the support of an application to real data.

Keywords: CreditRisk +; calibration; time series; default correlation; dependence structure (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
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