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Credit Risk Frontiers: Subprime Crisis, Pricing and Hedging, CVA, MBS, Ratings, and Liquidity
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Credit Risk Frontiers: Subprime Crisis, Pricing and Hedging, CVA, MBS, Ratings, and Liquidity

by Tomasz R. Bielecki, Damiano Brigo, Frédéric Patras
February 2011
Intermediate to advanced content levelIntermediate to advanced
768 pages
22h 39m
English
Bloomberg Press
Content preview from Credit Risk Frontiers: Subprime Crisis, Pricing and Hedging, CVA, MBS, Ratings, and Liquidity

Chapter 5

Modeling Heterogeneity of Credit Portfolios: A Top-Down Approach

Igor Halperin

Quantitative Research, JPMorgan

Top-down models of credit portfolios have become popular in recent years due to their simplicity and computational efficiency. In terms of individual constituents of a credit portfolio, a top-down approach is usually associated with a limit of a homogeneous portfolio where all obligors have equal spreads, notionals, and recoveries. In this chapter, we present several extensions of such a classical top-down (TD) setting that account for heterogeneity in all these parameters. In particular, we introduce a simple and numerically efficient way of dissecting the portfolio risk into contributions of individual names, and show how ...

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Publisher Resources

ISBN: 9781118003831Purchase book