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The credit risk+ model with general sector correlations |
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| Authors: | Amogh Deshpande Srikanth K Iyer |
| Institution: | (1) Department of Operations Research, North Carolina State University, Raleigh, NC, USA;(2) Department of Mathematics, Indian Institute of Science, Bangalore, India |
| Abstract: | We consider an enhancement of the credit risk+ model to incorporate correlations between sectors. We model the sector default rates as linear combinations of a common set of independent variables that represent macro-economic variables or risk factors. We also derive the formula for exact VaR contributions at the obligor level. |
| Keywords: | Credit risk+ Compound gamma distribution Value at risk Risk contribution Correlation Portfolio loss distribution Moment generating function |
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