Analytic Loss Distributions of Heterogeneous Portfolios In The Asset Value Credit Risk Model
19 Pages Posted: 7 May 2003
Date Written: April 2003
We provide an analytic solution to the asset value credit risk model that allows for heterogeneous correlations, default probabilities, recovery rates and exposures given certain regularity conditions are fulfilled.
Additionally, we extend the asset value model to include event risks such as country risk or dependencies between individual clients and derive analytic loss distributions and loss densities.
All results can be implemented in spreadsheet calculators such as Microsoft Excel or Lotus 1-2-3.
Keywords: credit portfolio risk, analytical loss distribution, country risk, microeconomic risk, asset value model
JEL Classification: C63, G21
Suggested Citation: Suggested Citation