We develop a framework for modelling conditional loss distributions through the introduction of risk factor dynamics. Asset value changes of a credit portfolio are linked to a dynamic global macroeconometric model, allowing macro effects to be isolated from idiosyncratic shocks. Default...

We build a compact global macroeconometric model capable of generating point and density forecasts for a core set of macroeconomic factors using recent advances in the analysis of cointegrating systems. We do so for a set of countries/regions and explicitly allow for interdependencies that exist...

In theory the potential for credit risk diversification for banks could be substantial. Portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the...