Homogenous Credit Model

Overview

In the homogenous Vasicek model, all loans in a portfolio are drawn from a single default distribution.

Estimation of Probabilities

• Probability of Single Default - estimating the probability of default based on history of a loan.
• Probability of Joint Default - estimating the probability of two loans defaulting in the same period. The probability of joint default together with the probability of a single loan defaulting implies the default correlation.

Homogenous Model Desktop

The following desktop conains the scripts necessary to run the homgeonous default model

Required Data

The homogenous model desktop scripts require a dataset that represent the loans on the banks books. It includes a script named data with a funciton called generate, which will generate a sample dataset, (an example of which is shown below)