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| Analytical Framework for Credit Portfolios, Part I: Systematic Risk by Mikhail Voropaev of ING Bank November 2009 Abstract: Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures (standard deviation, VaR and Expected Shortfall) as well as allocation of risk down to individual transactions. The underlying model is the industry standard multi-factor Merton-type model with arbitrary valuation function at horizon (in contrast to the simplistic default-only case). High accuracy of the proposed analytical technique is demonstrated by benchmarking against Monte Carlo simulations. Keywords: analytical VaR, credit portfolio, capital allocation, multi-factor model. Books Referenced in this paper: (what is this?)
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