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Knowledge Base » Credit Modelling: Simulating Default Distribution

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Credit Modelling: Simulating Default Distribution

Document ID: 2008-76 (previously 2008/02)
Published on: 1st March 2008
Average Rating: (Based on 1 review)

Modelling structured financial products requires the simulation of default distributions in portfolios of credit risky assets. These portfolios can be standardised products like the iBoxx CDO tranches, or highly specific books of banking business; like corporate, mortgage or credit card lending. As structuring has become ubiquitous, modelling of default distributions based on copula techniques has become an industry standard. In this note we describe the basic components of a credit model, consider techniques for numerically generating conditional and unconditional default distributions and finally present a large portfolio approximation which may be appropriate in certain cases.

• Model
  • 2 Factor Black Karasinski Model
  • 2 Factor Vasicek Model
  • Constant Volatility Model
  • Credit Model
  • Equity Mean-Reversion Model
  • Exchange Rate Model
  • General Equity Model
  • Inflation Model
  • Libor Market Model
  • Local Volatility Model
  • Mortality Model
  • Mortgage-Backed Securities Model
  • Other Models
  • Stochastic Volatility & Jump Diffusion Model
  • Time-Varying Deterministic Volatility Model

• Asset Class
  • Alternative Assets
  • Credit
  • Joint Distribution
  • Exchange Rate / Currency
  • Derivatives
  • Equity
  • Inflation
  • Interest Rates
  • Property

• Product Areas
  • Capital Measurement
  • Product Communication & Advice
  • Product Design & Governance
  • Risk & Capital Management

• Sectors
  • Retail Distribution
  • Asset and Wealth Management
  • Consultancy
  • Insurance
  • Pension Fund

Other categories

• Calibration Methodology & Techniques
• Calibration Notes
  • Market Consistent
  • Real World
• Calibration Targets
  • Target Methodology
  • Target Updates
  • Target Validation
• Events
• Insights
• iESG
  • Version 6.2
• Monte Carlo Methodology
  • Correlation Matrices
  • Random Number Generation
  • Variance Reduction
• Numerical Methods
• Outputs & Validation
• Solvency II Sample Documentation
• Archive

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