Chapter 22

Credit Risk Contributions

Dan Rosen

R2 Financial Technologies and The Fields Institute

David Saunders

University of Waterloo, Canada

Once the risk of a portfolio is calculated, a natural question to ask is: Where does the risk come from and what are the main contributors? We present a survey of the theory and the practical uses of risk contributions in credit risk management. Applications presented include the computation of portfolio credit risk and the contributions of systematic and idiosyncratic risk; instrument contributions to economic capital and other risk measures; instrument contributions to the credit valuation adjustment (CVA) of a counterparty portfolio; instrument and subportfolio contributions to expected losses of ...

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