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The credit risk\(^{+}\) model with general sector correlations. (English) Zbl 1204.91134
Summary: We consider an enhancement of the credit risk\(^{+}\) model to incorporate correlations between sectors. We model the sector default rates as linear combinations of a common set of independent variables that represent macro-economic variables or risk factors. We also derive the formula for exact VaR contributions at the obligor level.

MSC:
91G40 Credit risk
62P05 Applications of statistics to actuarial sciences and financial mathematics
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