Meta-model of a large credit risk portfolio in the Gaussian copula model

Florian Bourgey (), Emmanuel Gobet () and Clément Rey ()
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Florian Bourgey: CMAP - Centre de Mathématiques Appliquées de l'Ecole polytechnique - Inria - Institut National de Recherche en Informatique et en Automatique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique
Emmanuel Gobet: CMAP - Centre de Mathématiques Appliquées de l'Ecole polytechnique - Inria - Institut National de Recherche en Informatique et en Automatique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique
Clément Rey: CMAP - Centre de Mathématiques Appliquées de l'Ecole polytechnique - Inria - Institut National de Recherche en Informatique et en Automatique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique

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Abstract: We design a meta-model for the loss distribution of a large credit portfolio in the Gaussian copula model. Using both the Wiener chaos expansion on the systemic economic factor and a Gaussian approximation on the associated truncated loss, we significantly reduce the computational time needed for sampling the loss and therefore estimating risk measures on the loss distribution. The accuracy of our method is confirmed by many numerical examples.

Keywords: Monte Carlo simulation; portfolio credit risk; polynomial chaos expansion; meta-model (search for similar items in EconPapers)
Date: 2020-11-09
Note: View the original document on HAL open archive server: https://hal.science/hal-02291548v2
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Citations: View citations in EconPapers (2)

Published in SIAM Journal on Financial Mathematics, 2020, 11 (4), pp.1098-1136. ⟨10.1137/19M1292084⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02291548

DOI: 10.1137/19M1292084

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