Interaction particle systems for the computation of rare credit portfolio losses
type: Item
instance of: scholarly article
title: Interaction particle systems for the computation of rare credit portfolio losses
zbMATH Open document ID: 1199.91248
author: Jean-Pierre Fouque
author: Douglas Vestal
author: René Carmona
published in: Finance and Stochastics
publication date: 2010-04-22T00:00:00Z
review text: The authors follow the interacting particle system (IPS) approach and adapt it to the computation of loss probabilities for large credit portfolios. The interest to this problem is motivated by the uncontrolled growth of the market of collaterized debt obligations. The authors give an overview of Feynman-Kac measures on genealogical path spaces and the associated IPS interpretation. The loss process model for large credit portfolios is a discretized version of the standard first passage model of the structural approach. An algorithm for the solution is provided and its implementation is described in detail in the case of this stochastic volatility first passage structural model. Numerical results are obtained and discussed. The efficiency of the method is demonstrated in situations where importance sampling is impossible or numerically instable.
reviewed by: Yuliya S. Mishura
Mathematics Subject Classification ID: 91G40
Mathematics Subject Classification ID: 91B25
Mathematics Subject Classification ID: 60H35
Mathematics Subject Classification ID: 60K35
Mathematics Subject Classification ID: 91G60
zbMATH DE Number: 5697478
zbMATH Keywords: Interacting particle systems
zbMATH Keywords: rare defaults
zbMATH Keywords: Monte Carlo methods
zbMATH Keywords: credit derivatives
zbMATH Keywords: variance reduction
MaRDI profile type: Publication
full work available at URL: s00780-009-0098-8
OpenAlex ID: W2126661632
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cites work: Importance Sampling for Portfolio Credit Risk
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DOI: 10.1007/S00780-009-0098-8
description: scientific article; zbMATH DE number 5697478