A Simple Multi-Factor “Factor Adjustment” for …（一个简单的多因素的u201C调整u201D因素u2026）.pdfVIP

A Simple Multi-Factor “Factor Adjustment” for the Treatment of Credit Capital Diversification Juan Carlos Garcia Cespedes, Juan Antonio de Juan Herrero 1, Alex Kreinin 2 and Dan Rosen 3 First version: March 23 2004 th This version: June 9 2006 1 BBVA, Metodologías de Riesgo Corporativo, Paseo de la Castellana, 81, Planta 5 - 28046 Madrid, Spain. jcgarcia@ and juanantonio.dejuan@ 2 Algorithmics Inc. 185 Spadina Ave., Toronto, CANADA. alex@ 3 Corresponding author. Fields Institute for Research in Mathematical Sciences, 222 College Street, Toronto, Ontario, M5T 3J1, CANADA. drosen@fields.utoronto.ca . A Simple Multi-Factor “Factor Adjustment” for the Treatment of Credit Capital Diversification 4 Abstract We present a simple adjustment to the single-factor credit capital model, which recognizes the diversification from a multi-factor model. We introduce the concept of a diversification factor at the portfolio level, and show that it can be expressed as a function of two parameters that broadly capture the size (sector) concentration and the average cross-sector correlation. The model further supports an intuitive capital allocation methodology through the definition of marginal diversification factors at the sector or obligor level. We estimate the diversification factor for a family of models, and show that it can be express in parametric form or tabulated for potential regulatory applications and risk management. As a risk management tool, it can be used to understand concentration risk, capital allocation and sensitivities, stress testing, as well as to compute “real-time” marginal risk. 4 The views expressed in this paper are solely t