/


Measuring and managing market, credit and Op risk [51]

Go to: Summary | Previous | Next   
Bullet points include: Single index or factor for each obligor, (log) return of k’th firm’s equity value might be taken to be: Where, f = (standardised) factor return, alpha k = exposure of that firm to the market-wide factor and epsilon k = idiosyncratic noise term for that firm epsilon k and f assumed to be zero-mean, unit variance random variables Standard benchmark case as used in Basel II parameterisation – one factor and pairwise latent variable correlation alpha k of around 0.2

NAVIGATION LINKS
Contents | Prev | Next | ERM Lecture Series


Desktop view | Switch to Mobile