Value at risk (VaR) is today the standard tool in risk management for banks and other financial institutions. It is defined as the worst loss for a given confidence level: For a confidence level of e.g. p=99%, one is 99% certain that at the end of a chosen risk horizon there will be no greater...

This paper uses Monte Carlo simulations to assess the impact of noisy inputparameters on the accuracy of estimated portfolio credit risk. Assumptionsabout input quality are derived from the distribution of historical samplestatistics commonly used in default risk modelling. The resulting...

"A detailed, expert-driven guide to today's major financial point of interest The xVA Challenge: Counterparty Credit Risk, Funding, Collateral, and Capital is a practical guide from one of the leading and most influential credit practitioners, Jon Gregory. Focusing on practical methods, this...

n this paper we analyse recovery rates on defaulted bonds using the Standard and Poors / PMD database for the years 1981-1999. Due to the specific nature of the data (observations lie within 0 and 1), we must rely on nonstandard econometric techniques. The recovery rate density is estimated...

In this paper we present a tree model for defaultable bond prices which can be used for the pricing of credit derivatives. The model is based upon the two-factor Hull-White (1994) model for default-free interest rates, where one of the factors is taken to be the credit spread of the defaultable...

In this paper we examine the problem of partially hedging a given credit risk exposure. We derive hedges which satisfy certain optimality criteria: For a given investment into the hedge they minimize the remaining risk, or vice versa. This is motivated by the fact that it is a core business of...

The aim of this paper is the valuation and hedging of defaultable bonds and options on defaultable bonds. The Heath/Jarrow/Morton-framework is used to model the interest rate risk, and the time of default is determined by the first jump time of a point process. (...)

This paper first provides a simple but very general framework for credit portfolio modellingwhich is based on the distinction between systematic and unsystematic risk. Unsystematicor borrower-specific risk vanishes through diversification in a very large, infinitelyfine-grained portfolio. The...