Description

The class represents a generalized credit portfolio framework. Users which are not familiar with credit portfolio models in general and the CreditRisk+ model as well as the CreditMetrics model in particular should refer to the references given below. Models can be simulative or analytical (in case of a CreditRisk+ type model). The link function can be chosen to be either of the CreditRisk+ or the CreditMetrics type. Counterparties' default distribution can be specified to be either Bernoulli or Poisson, which is the default distribution in the basic CreditRisk+ framework.

Objects from the Class

Objects can be created via the init function (see init)

Slots

model.type:

Character value, specifying the model type. One can choose between “simulative” and “CRP” which corresponds to the analytical version of the CreditRisk+ model (see First Boston Financial Products, 1997)

default:

Character vector specifying the counterparties' default distribution (either “Bernoulli” or “Poisson”)

link.function:

character value, specifying the type of the link function. One can choose between “CRP”, which corresponds to \overline{PD}=PD\cdot (w^Tx) and “CM” which corresponds to \overline{PD}=Φ≤ft(\frac{Φ^{-1}PD-w^Tx}{√{1-w^TΣ w}}\right), where PD is the original PD from portfolio data, x is the vector of sector drawings, Φ is the CDF of the standard normal distribution, w is the vector of sector weights given in the portfolio data and Σ is the correlation matrix of the sector variables estimated from random.numbers. “CRP” will be used automatically if model.type == "CRP".

loss.unit:

numeric value used to discretize potential losses.

NS:

number of sectors

NC:

number of counterparties

name:

counterparties' names defined in the portfolio

NR:

counterparties' identification numbers defined in the portfolio

EAD:

counterparties' exposure at default defined in the portfolio

LGD:

counterparties' loss given default defined in the portfolio

PL:

counterparties' potential loss (EAD*LGD)

PD:

counterparties' probability of default defined in the portfolio

business:

counterparties' business line defined in the portfolio

country:

counterparties' country defined in the portfolio

EL.analyt:

Expected loss calculated from portfolio data (without discretization)

EL:

Expected loss derived from loss distribution

nu:

multiples of loss unit representing discretized potential losses within an analytical CreditRisk+ type model

PL.disc:

counterparties' potential loss (EAD*LGD) after discretization

PD.disc:

counterparties' probability of default defined in the portfolio after discretization

sec.var:

sector variances within an analytical CreditRisk+ type model

sector.names:

sector names

SD.div:

diversifiable part of portfolio risk (measured by standard deviation) in case of a CreditRisk+ type model

SD.syst:

Non-diversifiable part of portfolio risk (measured by standard deviation) in case of a CreditRisk+ type model

SD.analyt:

portfolio standard deviation derived from portfolio data in case of a CreditRisk+ type model

SD:

portfolio standard deviation derived from loss distribution

W:

counterparties' sector weights

idiosyncr:

counterparties idiosyncratic weight in case of a CreditRisk+ type model

alpha.max:

maximum level of CDF of the loss distribution within an analytical CreditRisk+ type model

a:

internal parameter used to calculate risk contributions in case of an analytical CreditRisk+ type model

PDF:

probability density function of portfolio losses

CDF:

cumulative distribution function of portfolio losses

B:

internal parameter used to calculate risk contributions in case of an analytical CreditRisk+ type model

loss:

portfolio losses corresponding to PDF and CDF

random.numbers:

sector drawing in case of a simulative model

LHR:

likelihood ration of sector drawing in case of a simulative model

max.entries

numeric value defining the maximum number of loss scenarios stored to calculate risk contributions.

N:

number of simulations in case of a simulative model

scenarios:

scenarios (rows) of random.numbers used within the simulation of portfolio losses

seed:

parameter used to initialize the random number generator. If seed is not provided a value based on current system time will be used.

loss.thr:

specifies a lower bound for portfolio losses to be stored in order to derive risk contributions on counterparty level. Using a lower value needs a lot of memory but will be necessary in order to calculate risk contributions on lower CDF levels. This parameter is used only if model.type == "simulative".

sim.losses:

simulated portfolio losses in case of a simulative model

CP.sim.losses:

simulated losses on counterparty level when the overall portfolio loss is greater or equal to loss.thr

Author(s)

Kevin Jakob

References

Jakob, K. & Fischer, M. "GCPM: A flexible package to explore credit portfolio risk" Austrian Journal of Statistics 45.1 (2016): 25:44
Morgan, J. P. "CreditMetrics-technical document." JP Morgan, New York, 1997
First Boston Financial Products, "CreditRisk+", 1997
Gundlach & Lehrbass, "CreditRisk+ in the Banking Industry", Springer, 2003

See Also

GCPM-package, init, analyze