To cite this record:
Credit risk contributions under the Vasicek one-factor model: a fast wavelet expansion approximation
Ortiz-Gracia, Luís
Masdemont Soler, Josep
Centre de Recerca Matemàtica

Imprint: Centre de Recerca Matemàtica 2011
Description: 23 p.
Series: Prepublicacions del Centre de Recerca Matemàtica ; 1022
Abstract: To measure the contribution of individual transactions inside the total risk of a credit portfolio is a major issue in financial institutions. VaR Contributions (VaRC) and Expected Shortfall Contributions (ESC) have become two popular ways of quantifying the risks. However, the usual Monte Carlo (MC) approach is known to be a very time consuming method for computing these risk contributions. In this paper we consider the Wavelet Approximation (WA) method for Value at Risk (VaR) computation presented in [Mas10] in order to calculate the Expected Shortfall (ES) and the risk contributions under the Vasicek one-factor model framework. We decompose the VaR and the ES as a sum of sensitivities representing the marginal impact on the total portfolio risk. Moreover, we present technical improvements in the Wavelet Approximation (WA) that considerably reduce the computational effort in the approximation while, at the same time, the accuracy increases.
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Language: Anglès.
Document: preprint
Subject: Risc (Economia) ; Impostos ; Risc de crèdit

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 Record created 2012-01-20, last modified 2014-06-07

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