Modelling and calibration errors in measures of portfolio credit risk
By: by Nikola Tarashev and Haibin Zhu.
Contributors: Zhu, Haibin, 1972-; Bank for International Settlements. Monetary and Economic Dept.
Series: BIS working papers -- no. 230
Publisher: Bank for International Settlements
Published: 2007
Place of publication: Basel, Switzerland
Language: eng
Format: Electronic resource
Description: This paper develops an empirical procedure for analyzing the impact of model misspecification and calibration errors on measures of portfolio credit risk. When applied to large simulated portfolios with realistic characteristics, this procedure reveals that violations of key assumptions of the well-known Asymptotic Single-Risk Factor (ASRF) model are virtually inconsequential. By contrast, flaws in the calibrated interdependence of credit risk across exposures, which are driven by plausible small-sample estimation errors or popular rule-of-thumb values of asset return correlations, can lead to significant inaccuracies in measures of portfolio credit risk. Similar inaccuracies arise under erroneous, albeit standard, assumptions regarding the tails of the distribution of asset returns.
Notes: Title from PDF file (viewed on Dec. 27, 2007).

"Monetary and Economic Department."

"June 2007."

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.