We provide an analytical VaR approach for the credit portfolio with liquidity horizon and the constant level of risk. Given any time horizon, a two period credit portfolio loss model is derived and, at the end of the first period, the portfolio is rebalanced to ensure a constant level risk of...

In this paper the ability of a variety of backtesting experiments to identify a model with misspecified volatility is examined. This quantitative testing assumes five years of risk factor observations, considers overlapping and non-overlapping backtest observations with horizons out to a year,...

In this paper, valuation of a derivative partially collateralized in a specific foreign currency defined in its credit support annex traded between default-free counterparties is studied. Two pricing approaches -- by hedging and by expectation -- are presented to obtain the same valuation...