Credit Risk [29]

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Bullet points include: Need to estimate processes driving the kj,t processes for each exposure. E.g. volatilities, drift terms and correlations between Brownian motions. Determine cut-off points, kj, for each exposure. Simulate vector of correlated kj,t processes up to horizon. Value debt conditional on the levels kj,T have attained at horizon, T (with refinement if deemed defaulted in meantime). Sum exposure values conditional on these levels. Repeat many times to build up estimate of portfolio value distribution

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