信用风险模型[57p].pptVIP

* For more than 2 counterparties, one way to find the loss or value distribution is to keep expanding the joint transition matrix. But, this could rapidly become computationally difficult since the number of possible scenarios equals 8 to the power of N. To see this, if we have 3 counterparties, the number of possible states in the future would be 512. One way to get around this problem is to simply use the variance summation equation to sum counterparty value volatilities together. But, this will only give you the volatility of portfolio losses or values. This volatility is useful only w