Credit Portfolio Risk

Overview

Credit portfolio risk is a subset of portfolio risk that focuses on the uncertainty in portfolio returns due to losses from loan default. While most the principles of risk share some characteristics, there are unique aspects of credit default that require specialized tools. In many assets, such as stocks or commidities, one can model the asset value using standard Gaussian tools, credit loass cannot easily be measured this way.

Topics

• Default Correlations - discusses the measurement and use of default correlations in constructing portfolio risk
• Credit VAR - applies Value at Risk to a credit portfolio
• Portfolio Variance - uses the portofolio variance as the measure of risk in a credit portfolio