Fast and accurate simulation of differently seasoned loan defaults in a Merton-style framework in discrete time
Zoltan Varsanyi ()
MPRA Paper from University Library of Munich, Germany
In this paper I present a method for the simulation of the default of such loans that have two important properties: they are seasoned – maybe even being at different points of the seasoning curve – and they evolve in an asset-value based framework. This latter model allows us to introduce correlation between the loan defaults. Although these two features are widely considered in modelling, linking them into one single (simulation) framework might not be that common. However, the most important merit of this paper is showing a fast and accurate simulation algorithm for the asset values.
Keywords: credit risk; simulation (search for similar items in EconPapers)
JEL-codes: C15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cmp and nep-rmg
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https://mpra.ub.uni-muenchen.de/10022/1/MPRA_paper_10022.pdf revised version (application/pdf)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:9918
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