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Confidence Intervals for Asset Correlations in the Asymptotic Single Risk Factor Model

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Book cover Operations Research Proceedings 2010

Part of the book series: Operations Research Proceedings ((ORP))

Abstract

The asymptotic single risk factor (ASRF) model, which has become a standard credit portfolio model in the banking industry, is parameterized by default probabilities and asset (return) correlations. In this model, individual and simultaneous confidence intervals for asset correlations are developed on the basis of observed default rates. Since the length of these confidence intervals depends on the confidence level chosen, they can be used to define stress scenarios for asset correlations.

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Author information

Authors and Affiliations

  1. Technische Universität Dresden, Dresden, Germany

    Steffi Höse & Stefan Huschens

Authors
  1. Steffi Höse
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  2. Stefan Huschens
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Corresponding author

Correspondence to Steffi Höse .

Editor information

Editors and Affiliations

  1. , Fakultät für Betriebswirtschaft, Universität der Bundeswehr München, Werner-Heisenberg-Weg 39, Neubiberg, 85577, Bayern, Germany

    Bo Hu

  2. , Fakultät für Wirtschafts- und Organisati, Universität der Bundeswehr München, Werner-Heisenberg-Weg 39, Neubiberg, 85577, Bayern, Germany

    Karl Morasch

  3. Fakultät für Informatik, Universität der Bundeswehr München, Werner-Heisenberg-Weg 39, Neubiberg, 85577, Germany

    Stefan Pickl

  4. , Fakultät für Informatik, Universität der Bundeswehr München, Werner-Heisenberg-Weg 39, Neubiberg, 85577, Bayern, Germany

    Markus Siegle

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Höse, S., Huschens, S. (2011). Confidence Intervals for Asset Correlations in the Asymptotic Single Risk Factor Model. In: Hu, B., Morasch, K., Pickl, S., Siegle, M. (eds) Operations Research Proceedings 2010. Operations Research Proceedings. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-20009-0_18

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