Frequency
Severity
3 dimension Duration
There are 95% chance (frequency) that we
won’t lose more than $100 million (minimum
severity) over the next 10 days ( duration )
Credit risk analy
Value at risk definiti
CREDIT RISK
PORTFOLIO
MODELS Recover rates
The inverse of loss distribution ( same
approach as loss distribution) , but
distribution fitted will be different.
Portfolio will say how many bonds default
but what will the loss be for each bond?
Severity
3 dimension Duration
There are 95% chance (frequency) that we
won’t lose more than $100 million (minimum
severity) over the next 10 days ( duration )
Credit risk analy
Value at risk definiti
CREDIT RISK
PORTFOLIO
MODELS Recover rates
The inverse of loss distribution ( same
approach as loss distribution) , but
distribution fitted will be different.
Portfolio will say how many bonds default
but what will the loss be for each bond?
