Importance sampling for risk contributions of credit portfolios

Research output: Chapters, Conference Papers, Creative and Literary Works (RGC: 12, 32, 41, 45)32_Refereed conference paper (with ISBN/ISSN)Not applicablepeer-review

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Detail(s)

Original languageEnglish
Title of host publicationProceedings - Winter Simulation Conference
Pages2771-2781
Publication statusPublished - 2010

Publication series

Name
ISSN (Print)0891-7736

Conference

Title2010 43rd Winter Simulation Conference, WSC'10
PlaceUnited States
CityBaltimore, MD
Period5 - 8 December 2010

Abstract

Value-at-Risk is often used as a risk measure of credit portfolios, and it can be decomposed into a sum of risk contributions associated with individual obligors. These risk contributions play an important role in risk management of credit portfolios. They can be used to measure risk-adjusted performances of subportfolios and to allocate risk capital. Mathematically, risk contributions can be represented as conditional expectations, which are conditioned on rare events. In this paper, we develop a restricted importance sampling (IS) method for simulating risk contributions, and devise estimators whose mean square errors converge in a rate of n-1. Furthermore, we combine our method with the IS method in the literature to improve the efficiency of the estimators. Numerical examples show that the proposed method works quite well. ©2010 IEEE.

Citation Format(s)

Importance sampling for risk contributions of credit portfolios. / Liu, Guangwu.

Proceedings - Winter Simulation Conference. 2010. p. 2771-2781 5678972.

Research output: Chapters, Conference Papers, Creative and Literary Works (RGC: 12, 32, 41, 45)32_Refereed conference paper (with ISBN/ISSN)Not applicablepeer-review