NDLI: Comparing the Value at Risk Performance of the CreditRisk$^{ + }$ and its Enhancement: A Large Deviations Approach

Please wait, while we are loading the content...

Methodology and Computing in Applied Probability : Volume 19

Methodology and Computing in Applied Probability : Volume 18

Methodology and Computing in Applied Probability : Volume 17

Methodology and Computing in Applied Probability : Volume 16

Methodology and Computing in Applied Probability : Volume 16, Issue 4, December 2014

Spatial Autocorrelation for Subdivided Populations with Invariant Migration Schemes

Scaling Analysis of Delayed Rejection MCMC Methods

Applications of the Variance of Final Outbreak Size for Disease Spreading in Networks

Asymptotic Joint Normality of Counts of Uncorrelated Motifs in Recursive Trees

Ruin Probabilities for Risk Models with Ordered Claim Arrivals

Exact Simulation Problems for Jump-Diffusions

M/M/c Retrial Queue with Multiclass of Customers

Compound Poisson Approximation to Convolutions of Compound Negative Binomial Variables

Second Order Asymptotics of Aggregated Log-Elliptical Risk

Non-Parametric Change-Point Estimation using String Matching Algorithms

Comparing the Value at Risk Performance of the CreditRisk$^{ + }$ and its Enhancement: A Large Deviations Approach

Numerical Approximation of Probability Mass Functions via the Inverse Discrete Fourier Transform

Methodology and Computing in Applied Probability : Volume 16, Issue 3, September 2014

Methodology and Computing in Applied Probability : Volume 16, Issue 2, June 2014

Methodology and Computing in Applied Probability : Volume 16, Issue 1, March 2014

Methodology and Computing in Applied Probability : Volume 15

Methodology and Computing in Applied Probability : Volume 14

Methodology and Computing in Applied Probability : Volume 13

Methodology and Computing in Applied Probability : Volume 12

Methodology and Computing in Applied Probability : Volume 11

Methodology and Computing in Applied Probability : Volume 10

Methodology and Computing in Applied Probability : Volume 9

Methodology and Computing in Applied Probability : Volume 8

Methodology and Computing in Applied Probability : Volume 7

Methodology and Computing in Applied Probability : Volume 6

Methodology and Computing in Applied Probability : Volume 5

Methodology and Computing in Applied Probability : Volume 4

Methodology and Computing in Applied Probability : Volume 3

Methodology and Computing in Applied Probability : Volume 2

Methodology and Computing in Applied Probability : Volume 1

Comparing the Value at Risk Performance of the CreditRisk$^{ + }$ and its Enhancement: A Large Deviations Approach

Content Provider	Springer Nature Link
Author	Deshpande, Amogh
Copyright Year	2013
Abstract	The standard CreditRisk$^{ + }$ (CR$^{ + }$) is a well-known default-mode credit risk model. An extension to the CR$^{ + }$ that introduces correlation through a two-stage hierarchy of randomness has been discussed by Deshpande and Iyer (Central Eur J Oper Res 17(2):219–228, 2009) and more recently by Sowers (2010). It is termed the 2-stage CreditRisk$^{ + }$ (2-CR$^{ + }$) in the former. Unlike the standard CR$^{ + }$, the 2-CR$^{ + }$ model is formulated to allow correlation between sectoral default rates through dependence on a common set of macroeconomic variables. Furthermore the default rates for a 2-CR$^{ + }$ are distributed according to a general univariate distribution which is in stark contrast to the uniformly Gamma distributed sectoral default rates in the CR$^{ + }$. We would then like to understand the behaviour of these two models with regards to their computed Value at Risk (VaR) as the number of sectors and macroeconomic variables approaches infinity. In particular we would like to ask whether the 2-CR$^{ + }$ produces higher VaR than the CR$^{ + }$ and if so then for which type of credit portfolio. Utilizing the theory of Large deviations, we provide a methodology for comparing the Value at risk performance of these two competing models by computing certain associated rare event probabilities. In particular we show that the 2-Stage CR$^{ + }$ definitely produces higher VaR than the CR$^{ + }$ for a particular class of a credit portfolio which we term as a “balanced” credit portfolio. We support this statistical risk analysis through numerical examples.
Starting Page	1009
Ending Page	1023
Page Count	15
File Format	PDF
ISSN	13875841
Journal	Methodology and Computing in Applied Probability
Volume Number	16
Issue Number	4
e-ISSN	15737713
Language	English
Publisher	Springer US
Publisher Date	2013-07-26
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Value at risk CreditRisk$^{ + }$ 2-stage CreditRisk$^{ + }$ model Rare event Large deviations principle Gärtner-Ellis theorem Statistics Life Sciences Electrical Engineering Economics general Business/Management Science
Content Type	Text
Resource Type	Article
Subject	Statistics and Probability

Sl.	Authority	Responsibilities	Communication Details
1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
5	Website/Portal (Helpdesk)	Queries regarding NDLI and its services	support@ndl.gov.in
6	Contents and Copyright Issues	Queries related to content curation and copyright issues	content@ndl.gov.in
7	National Digital Library of India Club (NDLI Club)	Queries related to NDLI Club formation, support, user awareness program, seminar/symposium, collaboration, social media, promotion, and outreach	clubsupport@ndl.gov.in
8	Digital Preservation Centre (DPC)	Assistance with digitizing and archiving copyright-free printed books	dpc@ndl.gov.in
9	IDR Setup or Support	Queries related to establishment and support of Institutional Digital Repository (IDR) and IDR workshops	idr@ndl.gov.in

Asymmetric Evaluations of Erasure and Undetected Error Probabilities

Functional Approach of Large Deviations in General Spaces

Some applications and methods of large deviations in finance and insurance

Large deviations for directed percolation on a thin rectangle

Rare Event Analysis for Minimum Hellinger Distance Estimators via Large Deviation Theory

Precise large deviations for dependent regularly varying sequences

Large and moderate deviations principles for kernel estimators of the multivariate regression

Large Deviations Principle for a Large Class of One-Dimensional Markov Processes

The local principle of large deviations for solutions of Itô stochastic equations with quick drift

Comparing the Value at Risk Performance of the CreditRisk$^{ + }$ and its Enhancement: A Large Deviations Approach

Similar Documents

Asymmetric Evaluations of Erasure and Undetected Error Probabilities

Functional Approach of Large Deviations in General Spaces

Some applications and methods of large deviations in finance and insurance

Large deviations for directed percolation on a thin rectangle

Rare Event Analysis for Minimum Hellinger Distance Estimators via Large Deviation Theory

Precise large deviations for dependent regularly varying sequences

Large and moderate deviations principles for kernel estimators of the multivariate regression

Large Deviations Principle for a Large Class of One-Dimensional Markov Processes

The local principle of large deviations for solutions of Itô stochastic equations with quick drift

Comparing the Value at Risk Performance of the CreditRisk$^{ + }$ and its Enhancement: A Large Deviations Approach