Pustaka Ilmiah Universitas Padjadjaran

Abstrak

Portfolio Of Credit Risk By Factor Models

Factor models are the models that can replicate realistic correlated default behavior. In factor models, the dependence between the individual defaults is driven by a small number of systemic factors. In this paper, a particularly simple class of default risk models is presented the conditionally independent models. These models were built up from the simplest case of a homogeneous portfolio to the complex case of multifactor portfolio with rating classes of two asset classes. The process in this financial assignment tries to find conditional default probability and analyze the default. The analysis, numerically, uses simple firm value model with the assistance Matlab-7 software. At the end of the explanation about factor models and default analysis, it is obtained that the number of conditional default probability in fortfolio depends very strongly on the default correlation between these obligors. The effect of default correlation can be very large, sometime as large as the default probabilities themselves. Therefore these effects must not be ignored in the portfolio risk management.