Calculating Value-at-Risk contributions in CreditRisk+

Details Calculating Value-at-Risk contributions in CreditRisk+ Calculating Value-at-Risk contributions in CreditRisk+

2001-12-04

arxiv.org/abs/cond-mat/0112045v2

GARP Risk Review issue 07 Jul/Aug 2002, 43-47

Physics

Condensed Matter

Statistical Mechanics

11 pages, LaTeX with hyperref package

Scientific paper

Credit Suisse First Boston (CSFB) launched in 1997 the model CreditRisk+ which aims at calculating the loss distribution of a credit portfolio on the basis of a methodology from actuarial mathematics. Knowing the loss distribution, it is possible to determine quantile-based values-at-risk (VaRs) for the portfolio. An open question is how to attribute fair VaR contributions to the credits or loans forming the portfolio. One approach is to define the contributions as certain conditional expectations. We develop an algorithm for the calculations involved in this approach. This algorithm can be adapted for computing the contributions to the portfolio Expected Shortfall (ES). Key words: CreditRisk+; Value-at-Risk (VaR); risk contribution; conditional expectation.

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