Journal of Risk Model Validation
ISSN:
1753-9579 (print)
1753-9587 (online)
Editor-in-chief: Steve Satchell

Credit portfolio models in the presence of forward-looking stress events
Alexander Denev
Abstract
ABSTRACT
We describe a method, based on the Merton model, to improve credit portfolio models by adding to the underlying distributions forward-looking tails deducted through the Bayesian networks technology. Given the forward-looking stance of the approach, its results give a better quantified picture of the vulnerabilities of an institution under extreme stress and at the same time satisfy the Basel II recommendations for integrating forward-looking stress scenarios in the decision making process and capital planning. We show the procedure in detail in a stylized case.
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Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
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