Credit portfolio models in the presence of forward-looking stress events

Alexander Denev

Journal of Risk Model Validation

Abstract: ABSTRACT We describe a method, based on the Merton model, to improve credit portfolio models by adding to the underlying distributions forward-looking tails deducted through the Bayesian networks technology. Given the forward-looking stance of the approach, its results give a better quantified picture of the vulnerabilities of an institution under extreme stress and at the same time satisfy the Basel II recommendations for integrating forward-looking stress scenarios in the decision making process and capital planning. We show the procedure in detail in a stylized case.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-risk-model-validat ... ooking-stress-events (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ5:2255868

Access Statistics for this article

More articles in Journal of Risk Model Validation from Journal of Risk Model Validation
Bibliographic data for series maintained by Thomas Paine ().