Leiden University Student Repository

Tang, X. (2015)

Credit Loss Distribution and Copula in Risk Management

Master thesis | Mathematics (MSc)

In this thesis we focus on the modeling of large credit losses in corporate asset portfolio. We compare loss estimates based on the classic Vasicek’s approach with the assumption of normal-distributed loss distribution, and the copula approach generating heavier-tailed loss distribution. We also provide the numeric implementations of both Vasicek’s and copula modeling approaches which are widely used in bank’s risk management. In addition, we demonstrate how Vasicek’s approach can be adopted for estimating portfolio’s concentration risk charge. The last work is my own development inspired by my internship experience at the Royal Bank of Scotland. All presented results are complemented with review of the corresponding classical works in credit risk modeling.

Author

Tang, X.

Faculty

Faculty of Science

Supervisors

Gaans, O. van

ECTS Credits

40

Language

en