On the Applicability of Fourier-Based Methods to Integrated Market and Credit Portfolio Models
In the last chapter, we have seen that the missing stochastic modeling of market risk factors in standard credit portfolio models can cause an underestimation of economic capital, especially for high grade credit portfolios with a low stochastic dependence between the obligors’ credit quality changes.
KeywordsCredit Spread Credit Portfolio Zero Coupon Bond Systematic Risk Factor Numerical Integration Rule
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