This work aims to illustrate an advanced quantitative methodology for measuring the credit risk of a loan portfolio allowing for diversification effects. Also, this methodology can allocate the credit capital coherently to each counterparty in the portfolio. The analytical approach used for...

In this paper a simple and innovative model for measuring more accurately the credit tail risk of a banking book is presented. This is a Monte Carlo simulation model in which the credit loss severity (LGD) is a stochastic variable and it is correlated to the default event. Specifically, LGD is...

type="main" <p>The aim of this work is to explore how importance sampling (IS) techniques may improve internal banking portfolio optimization models. The current economic downturn contributes to an increase in the credit risk amount of the loan portfolios reducing the quality of the banking credit....</p>

A comparative analysis of the advanced methodologies used by the banking industry for measuring the total economic capital underlines the superiority of the top-down technique based on Monte Carlo simulation and Gaussian copula.This model is particularly suited to consider the empirical...

<em>Financial Risk Aggregation: A Simulative Study </em> - Banks are exposed to many different risk types due to their business activities, such as credit risk, market risk and operational risk. The task of the risk management division is to measure all these risks and to determine the necessary amount...