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portfolioRisk

Generate portfolio-level risk measurements

Syntax

[riskMeasures,confidenceIntervals] = portfolioRisk(cdc)
[riskMeasures,confidenceIntervals] = portfolioRisk(cdc,Name,Value)

Description

example

[riskMeasures,confidenceIntervals] = portfolioRisk(cdc) returns tables of risk measurements for the portfolio losses. The simulate function must be run before portfolioRisk is used. For more information on using a creditDefaultCopula object, see creditDefaultCopula.

example

[riskMeasures,confidenceIntervals] = portfolioRisk(cdc,Name,Value) adds an optional name-value pair argument for ConfidenceIntervalLevel. The simulate function must be run before portfolioRisk is used.

Examples

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Load saved portfolio data.

load CreditPortfolioData.mat;

Create a creditDefaultCopula object with a two-factor model.

cdc = creditDefaultCopula(EAD,PD,LGD,Weights2F,'FactorCorrelation',FactorCorr2F)
cdc = 

  creditDefaultCopula with properties:

            Portfolio: [100x5 table]
    FactorCorrelation: [2x2 double]
             VaRLevel: 0.9500
      PortfolioLosses: []

Set the VaRLevel to 99%.

cdc.VaRLevel = 0.99;

Use the simulate function before running portfolioRisk. Then use portfolioRisk with the creditDefaultCopula object to generate the riskMeasure and ConfidenceIntervals tables.

cdc = simulate(cdc,1e5);
[riskMeasure,confidenceIntervals] = portfolioRisk(cdc,'ConfidenceIntervalLevel',0.9)
riskMeasure =

  1x4 table

      EL       Std       VaR       CVaR 
    ______    ______    ______    ______

    24.774    23.693    101.57    120.22


confidenceIntervals =

  1x4 table

          EL                 Std                 VaR                 CVaR      
    _______________    ________________    ________________    ________________

    24.65    24.897    23.606     23.78    100.83    102.57    119.28    121.17

Input Arguments

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creditDefaultCopula object obtained after running the simulate function.

For more information on creditDefaultCopula objects, see creditDefaultCopula.

Name-Value Pair Arguments

Specify optional comma-separated pairs of Name,Value arguments. Name is the argument name and Value is the corresponding value. Name must appear inside single quotes (' '). You can specify several name and value pair arguments in any order as Name1,Value1,...,NameN,ValueN.

Example: [riskMeasure,confidenceIntervals] = portfolioRisk(cdc,'ConfidenceIntervalLevel',0.9)

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Confidence interval level, specified as the comma-separated pair consisting of 'ConfidenceIntervalLevel' and a numeric between 0 and 1. For example, if you specify 0.95, a 95% confidence interval is reported in the output table (riskMeasures).

Data Types: double

Output Arguments

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Risk measures, returned as a table containing the following columns:

  • EL — Expected loss, the mean of portfolio losses

  • Std — Standard deviation of the losses

  • VaR — Value at risk at the threshold specified by the VaRLevel property of the creditDefaultCopula object

  • CVaR — Conditional VaR at the threshold specified by the VaRLevel property of the creditDefaultCopula object

Confidence intervals, returned as a table of confidence intervals corresponding to the portfolio risk measures reported in the riskMeasures table. Confidence intervals are reported at the level specified by the ConfidenceIntervalLevel parameter.

References

[1] Crouhy, M., Galai, D., and Mark, R. “A Comparative Analysis of Current Credit Risk Models.” Journal of Banking and Finance. Vol. 24, 2000, pp. 59–117.

[2] Gordy, M. “A Comparative Anatomy of Credit Risk Models.” Journal of Banking and Finance. Vol. 24, 2000, pp. 119–149.

[3] Gupton, G., Finger, C., and Bhatia, M. “CreditMetrics – Technical Document.” J. P. Morgan, New York, 1997.

[4] Jorion, P. Financial Risk Manager Handbook. 6th Edition. Wiley Finance, 2011.

[5] Löffler, G., and Posch, P. Credit Risk Modeling Using Excel and VBA. Wiley Finance, 2007.

[6] McNeil, A., Frey, R., and Embrechts, P. Quantitative Risk Management: Concepts, Techniques, and Tools. Princeton University Press, 2005.

Introduced in R2017a

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