Credit Portfolio Models
Credit portfolio models continue to play a key role in measuring and managing credit portfolio risk throughout the industry and provide valuable inputs for portfolio optimization.
Key Project Experience
- We assisted a leading energy trader in designing and developing a highly customised CPM for a variety of financial instruments in their trading book. The CPM uses a C-CDS (contingent credit default swap) approach to allow for the measurement and monitoring of wrong way risks (in addition to standard CPM features). We further helped to implement the CPM and calibrated it to representative market data.
- We supported a major Swiss insurance company in building a new CPM to calculate economic capital for an investment portfolio consisting mainly of fixed income instruments. The implemented methodology was based on the structured Merton model, incorporated within a Monte Carlo framework, and was tailored to the client’s risk management and reporting needs. We have also designed a semi-automated calibration tool which facilitates regular re-calibrations of the CPM.
C: Jan Grim
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