Credit Portfolio Management

Effective calculation of economic capital

A credit portfolio model provides a view of the default and (credit) spread risk of financial instruments at portfolio level. Typically a credit portfolio model incorporates correlation effects between borrowers. The output of a credit portfolio model can be used to determine the level of economic capital required to cover the risk of unexpected credit default losses.

Analytical approach for credit value at risk (CVaR)

With FlexFinance CPM, FERNBACH offers a credit portfolio model based on the well-known CreditRisk+ approach. The application calculates the CVaR, using the standard method or a refined method. The CVaR represents the credit loss which will not be in excess of the expected credit loss, with some level of confidence over a certain time horizon.

FlexFinance calculates the CVaR at full portfolio level. A drill down is available to analyse the contribution of different counterparties to the CVaR.

Loss distribution