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Enhancing CreditRisk+

by Götz Giese of Commerzbank AG

April 2003

Abstract: We discuss the CreditRisk+ methodology from the perspective of the moment generating function of the credit factors. This representation lends itself to a new recursion formula for the portfolio loss distribution that is more accurate and considerably faster, particularly for large portfolios. We discuss how the model can be extended to incorporate correlations between risk factors and derive the general formula for exact VaR contributions in this modelling framework.

Published in: RISK, Vol. 16, No. 4, (April 2003), pp. 73-77.

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