We analyse the mathematical structure of portfolio credit risk models with particular regard to the modelling of dependence between default events in these models. We explore the role of copulas in latent variable models (the approach that underlies KMV and CreditMetrics) and use non-Gaussian copulas to present extensions to standard industry models. We explore the role of the mixing distributi...

This paper proposes a new combination of quantitative models and Genetic Algorithms for the task of optimising credit portfolios. Currently, quantitative portfolio credit risk models are used to calculate portfolio risk figures, e. g. expected losses, unexpected losses and risk contributions. Usually, this information is used for optimising the risk-return profile of the portfolio. We show that...

The impact of a stress scenario of default events on the loss distribution of a credit portfolio can be assessed by determining the loss distribution conditional on these events. While it is conceptually easy to estimate loss distributions conditional on default events by means of Monte Carlo simulation, it becomes impractical for two or more simultaneous defaults as then the conditioning event...

Among the ‘reduced form models’ for measuring the credit risk of a bank’s portfolio is CreditRisk+, which provides a closed-form solution for calculating the portfolio loss distribution based on an actuarial approach. The limitations of this model are well known, but they are often misinterpreted as being deeply embedded within the model. Dismantling the mathematical components of the model all...

in this paper we analyze the relationship between creditrisk & profitability in iranian banks. the credit risk is measured bynon-performing loans ratio &loan; loss provision ratio. also, theprofitability has been measured by return on assets &return; on equity.the survey data are from fifteen iranian banks& credit institutesduring the time period of 2003 to 2009.results show that there is asign...

This paper proposes a new combination of quantitative models and Genetic Algorithms for the task of optimising credit portfolios. Currently, quantitative portfolio credit risk models are used to calculate portfolio risk figures, e. g. expected losses, unexpected losses and risk contributions. Usually, this information is used for optimising the risk-return profile of the portfolio. We show that...

the present paper aimed at studying the current models of credit portfolio management. there are currently three types of models which consider the risk of credit portfolio: the structural models (moody's kmv model, and credit- metrics model), the intensity models (the actuarial models) and the econometric models (the macro-factors model). the development of these three types of models is based...