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1. 100871
2. 100871

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O242.1

RiskMetrics Group J.P.Morgan


CreditMetrics

1984~
2006

CreditMetrics Robert Merton

Black Scholes

Merton

Merton

[1]

N Vi =
i 1, 2 , N
0 1/N
i

Z i = wZ + 1 w2 i

=
i 1, 2 , N

[1]

Z i w
Z 1 2 N

[1] Z
Z i
2

w
=
i 1, 2 , N p Z i =
i 1, 2 , N
= ( p ) Z i < i
1

i Z i Vi

Pr(Vi =
0) =
Pr( Z i < ) =
1 Pr(Vi =
1/ N )
V

V = V1 + V2 + + VN

[2]

2
2.1
[1][2] CreditMetrics V
Z
1 2 N Z 1

2 N [1] Z i =
i 1, 2 , N
Z i = ( p )
1

V V
V
V

N1
p
1% = 2.33 Z i -2 Z i 0

2.2

[1] Z
Z

[1]
Z i Z i N ( wZ , (1 w )) Z w
2

Z i -1
w=0.5 Z i Z Z i

relative frequency

zi
1 Z i Z

Fig.1 Unconditional asset distribution and conditional distributions with positive and negative Z i
i

i <

wZ

1 w2

=
i 1, 2 , N

[3]

i p Z i
[3]

p( Z ) = (

- wZ
1- w

[4]

p ( Z ) Z

p ( Z ) Z

Z Vi =
i 1, 2 , N
(1- p ( Z )) / N p ( Z )(1- p ( Z )) / N 2 Z
V (1- p ( Z )) p ( Z )(1- p ( Z )) / N

2.2.1LLNLaw of Large Numbers

Z p ( Z )

N
p ( Z )(1- p ( Z )) / N
(1- p ( Z ))
0 (1- p ( Z )) V ~(1- p ( Z ))

V Z[4] V Z
Z
1% Z 1%-2.33 1%
(1- p ( -2.33))

v 0 v 1 V v

Pr{V < v} =
Pr{1- p ( Z ) < v} =
[

- 1- w2 -1 (1 - v)
w

], 0 v 1

[5]

[5] v

1- w2
w

1 w2 -1 (1 - v)
-w
((1 - v))

0 v 1

[6]

p w
w
(1- p ( Z ))
pw

2.2.2CLT: Central Limit Theorem


Z
Z

V ~ N((1- p ( Z )),

p ( Z )(1- p ( Z ))
)
N

[7]

-2 Z market factor
Z (1- p ( Z ))

Z
N

Portfolio Value

Market Factor
2

Fig.2 Conditional portfolio distribution as a function of Z


[7] V v

PrZ {V < v} = (

v - (1- p ( Z ))
), 0 v 1
p( Z )(1- p( Z )) / N )

[8]

PrZ Z
v [8] Z

Pr{V < v=
} E (PrZ {V < v})
=

( z ) (

v - (1- p ( z ))
)dz 0 v 1 [9]
p ( z )(1- p ( z )) / N )

[9]
V
[9]

[9] 1000

N
N+1

[9]

2.2.3(MGF: Moment Generating Function)

EZ Z Vi =
i 1, 2 , N
tV1
1
=
EZ [etV ] E=
etVN ] EZ [etV=
] EZ [etVN ] [ EZ etV1 ]N
Z [e

Z V1 1/N (1- p ( Z )) 0 p ( Z ) V1

EZ [etV1 ] =
(1 - p ( Z ))et / N + p ( Z )e0 =
et / N [1 -p ( Z )(1 e-t / N )]

[10]

EZ [etV ] =
et [1 -p ( Z )(1 e-t / N )]N

[11]

[11]

E[e =
] e
tV

p ( z )(1 e
( z )[1 --

-t / N

)]N dz

[12]

[9][12]
[12]

[12]

3
[9] A
1999
805 2000 900 2001 1029 2002 1103
2003 1182

1
Table 1 default probabilities with different credit ratings

[00.02%)

[0.02%0.15%)

[0.15%0.5%)

[0.5%1.7%)

[1.7%4.7%)

[4.7%6%)

[6%15%)

[15%1)

w=0.5 500
Monte-Carlo 50000
5% 6
2 p=5%,N=500,w=0.5

Table 2 respective percentile values with monte-carlo, lln, clt and mgf methods

monte-carlo

lln

clt

mgf

90.00%

498.5

497.9

498.9

498.5

80.00%

496.0

495.8

496.5

496.1

50.00%

485.5

485.6

485.8

485.5

20.00%

462.5

460.6

459.9

461.6

10.00%

442.5

438.5

437.2

197.1

5.00%

419.0

414.5

412.7

380.4

0.50%

327.0

330.0

326.7

359.7

0.05%

161.5

249.9

245.5

179.2

3363.439

0.475

3.211

642.434

monte-carlollnclt mgf

500

Relative frequency

Portfolio value
3 p=5%,N=500,w=0.5

Fig.3 portfolio density function using monte-carlo, lln, clt and mgf methods

Cumulative probability

Portfolio value

4 p=5%,N=500,w=0.5

Fig.4 portfolio CDF using monte-carlo, lln, clt and mgf methods

1.6% 4 16% 8 500

3 p=1.6%,N=500,w=0.5

Table 3 respective percentile values with monte-carlo, lln, clt and mgf methods

monte-carlo

lln

clt

mgf

90.00%

500.0

499.7

500.0

499.2

80.00%

499.5

499.2

499.5

498.2

50.00%

496.5

496.7

496.7

495.3

20.00%

489.0

488.4

488.1

486.4

10.00%

477.5

479.4

479.0

478.8

5.00%

466.0

468.3

467.7

334.4

0.50%

389.0

419.3

418.2

265.1

0.05%

337.5

358.9

357.3

164.8

3303.244

0.057

3.080

1000.083

4 p=0.16%,N=500,w=0.5

Table 4 respective percentile values with monte-carlo, lln, clt and mgf methods

monte-carl

lln

clt

mgf

90.00

486.5

485.3

485.8

485.8

80.00

475.0

474.4

474.8

474.8

50.00

434.5

437.3

437.4

435.5

20.00

373.5

373.1

372.7

370.9

10.00

335.5

329.3

328.6

326.6

5.00

289.0

289.4

288.5

78.2

0.50

145.0

183.7

182.3

282.7

0.05

124.0

113.1

111.4

97.2

392.971

0.051

2.703

295.97

8
,

4
2500 4 10000

CreditMetrics


CreditMetrics

[1] Christopher C. Finger. Conditional Approaches for CreditMetrics Portfolio


Distributions[J]. CreditMetrics
[2] Greg

M.

Gupton,

CreditMetrics

TM

(R )

Monitor, 1999, 2(1):14-33.

Christopher

C.

Finger,

and

Mickey

Bhatia.

-Technical Document[M]. New York: Morgan Guaranty Trust

Company ,1997.
[3] Merton, Robert C. On the Pricing of Corporate Debt: The Risk Structure of Interest
Rates[J].The Journal of Finance, 1974,2: 449-470.
[4] () Manuel Ammann . [M].
,2004
[5] () Saunders, Anthony .
[M].,2001
[6] .[M].,2001
[7] .[M].,2003
[8] () R. , L. .[M].
,2001.

Conditional approaches for distribution of credit portfolio value


YUE Da-zhou1 , ZHU Bei-min 2 , LI Dong lai 2

(1. China Centre for Economic Research, Peking University, Beijing, 100871, China;
2. Department of Financial Mathematics, School of Mathematical Sciences, Peking

University, Beijing, 100871, China )

Abstract: The calculation of the distribution of credit portfolio value is very


important in the CreditMetrics model. Traditionally Monte Carlo simulation is
used to calculate the full distribution of portfolio value. The model discussed in
this article decomposes the credit portfolio value into two parts: market factor
and idiosyncratic factor, then three new conditional approaches are introduced
to handle the problem. Finally the three methods were compared with standard
Monte Carlo simulation in concrete cases.

key wordscredit portfolio; distribution;simulations; conditional random variable