KISS Approach to Credit Portfolio Modeling
by Mikhail Voropaev of the ING Bank
Abstract: A simple, yet reasonably accurate, analytical technique is proposed for multi-factor structural credit portfolio models. The accuracy of the technique is demonstrated by benchmarking against Monte Carlo simulations. The approach presented here may be of high interest to practitioners looking for transparent, intuitive, easy to implement and high performance credit portfolio model.
Keywords: analytical VaR, credit portfolio, capital allocation, multi-factor model
Related reading: An Analytical Framework for Credit Portfolio Risk Measures