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The credit risk+ model with general sector correlations

  • Amogh Deshpande
  • Srikanth K. IyerEmail author
Original Paper

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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References

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Copyright information

© Springer-Verlag 2009

Authors and Affiliations

  1. 1.Department of Operations ResearchNorth Carolina State UniversityRaleighUSA
  2. 2.Department of MathematicsIndian Institute of ScienceBangaloreIndia

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