On Partial Defaults in Portfolio Credit Risk: A Poisson Mixture Model Approach

Rafael Weißbach and Carsten von Lieres und Wilkau

No 2005,06, Technical Reports from Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen

Abstract: Most credit portfolio models exclusively calculate the loss distribution for a portfolio of performing counterparts. Conservative default definitions cause considerable insecurity about the loss for a long time after the default. We present three approaches to account for defaulted counterparts in the calculation of the economic capital. Two of the approaches are based on the Poisson mixture model CreditRisk+ and derive a loss distribution for an integrated portfolio. The third method treats the portfolio of non-performing exposure separately. All three calculations are supplemented by formulae for contributions of the counterpart to the economic capital.

Keywords: Portfolio credit risk; CreditRisk+; Recovery (search for similar items in EconPapers)
JEL-codes: C51 G11 G18 G33 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb475:200506

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