Risk Measurement for Portfolio Credit Risk Based on a Mixed Poisson Model
Experiences manifest the importance of comovement and communicable characters among the risks of financial assets. Therefore, the portfolio view considering dependence relationship among credit entities is at the heart of risk measurement. This paper introduces a mixed Poisson model assuming default...
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| Format: | Article |
| Language: | English |
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Wiley
2014-01-01
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| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2014/597814 |
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| _version_ | 1832552750320189440 |
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| author | Rongda Chen Huanhuan Yu |
| author_facet | Rongda Chen Huanhuan Yu |
| author_sort | Rongda Chen |
| collection | DOAJ |
| description | Experiences manifest the importance of comovement and communicable characters among the risks of financial assets. Therefore, the portfolio view considering dependence relationship among credit entities is at the heart of risk measurement. This paper introduces a mixed Poisson model assuming default probabilities of obligors depending on a set of common economic factors to construct the dependence structure of obligors. Further, we apply mixed Poisson model into an empirical study with data of four industry portfolios in the financial market of China. In the process of model construction, the classical structural approach and option pricing formula contribute to estimate dynamic default probabilities of single obligor, which helps to obtain the dynamic Poisson intensities under the model assumption. Finally, given the values of coefficients in this model calculated by a nonlinear estimation, Monte Carlo technique simulates the progress of loss occurrence. Relationship between default probability and loss level reflected through the MC simulation has practical features. This study illustrates the practical value and effectiveness of mixed Poisson model in risk measurement for credit portfolio. |
| format | Article |
| id | doaj-art-fb0cb378e49b4ae197bef29e02dad31a |
| institution | Kabale University |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2014-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-fb0cb378e49b4ae197bef29e02dad31a2025-02-03T05:58:07ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2014-01-01201410.1155/2014/597814597814Risk Measurement for Portfolio Credit Risk Based on a Mixed Poisson ModelRongda Chen0Huanhuan Yu1School of Finance, Zhejiang University of Finance and Economics, Hangzhou 310018, ChinaSchool of Finance, Zhejiang University of Finance and Economics, Hangzhou 310018, ChinaExperiences manifest the importance of comovement and communicable characters among the risks of financial assets. Therefore, the portfolio view considering dependence relationship among credit entities is at the heart of risk measurement. This paper introduces a mixed Poisson model assuming default probabilities of obligors depending on a set of common economic factors to construct the dependence structure of obligors. Further, we apply mixed Poisson model into an empirical study with data of four industry portfolios in the financial market of China. In the process of model construction, the classical structural approach and option pricing formula contribute to estimate dynamic default probabilities of single obligor, which helps to obtain the dynamic Poisson intensities under the model assumption. Finally, given the values of coefficients in this model calculated by a nonlinear estimation, Monte Carlo technique simulates the progress of loss occurrence. Relationship between default probability and loss level reflected through the MC simulation has practical features. This study illustrates the practical value and effectiveness of mixed Poisson model in risk measurement for credit portfolio.http://dx.doi.org/10.1155/2014/597814 |
| spellingShingle | Rongda Chen Huanhuan Yu Risk Measurement for Portfolio Credit Risk Based on a Mixed Poisson Model Discrete Dynamics in Nature and Society |
| title | Risk Measurement for Portfolio Credit Risk Based on a Mixed Poisson Model |
| title_full | Risk Measurement for Portfolio Credit Risk Based on a Mixed Poisson Model |
| title_fullStr | Risk Measurement for Portfolio Credit Risk Based on a Mixed Poisson Model |
| title_full_unstemmed | Risk Measurement for Portfolio Credit Risk Based on a Mixed Poisson Model |
| title_short | Risk Measurement for Portfolio Credit Risk Based on a Mixed Poisson Model |
| title_sort | risk measurement for portfolio credit risk based on a mixed poisson model |
| url | http://dx.doi.org/10.1155/2014/597814 |
| work_keys_str_mv | AT rongdachen riskmeasurementforportfoliocreditriskbasedonamixedpoissonmodel AT huanhuanyu riskmeasurementforportfoliocreditriskbasedonamixedpoissonmodel |