Estimating Portfolio of Bonds Credit Risk Value-at-Risk Based on Copula Function

摘要

Risk management has become one of the top priorities in financial industry. A huge effort is being invested in developing reliable risk measurement methods and sound risk management techniques by academics and practitioners alike. Credit Metrics developed by J.P. Morgan is a useful tool for measure portfolio credit risk under Value-at-Risk. However, there are some deficiencies in finding correlation matrix of assets in portfolio under this methodology. In this paper, to improve the precise of estimate the correlation matrix, Copula function is combined with Credit Metrics. A brief introduction about the concepts of Copula and Credit Metrics will be also provided here. An example is performed to estimating the portfolio of bonds credit risk Value-at-Risk, using this combined method, in which Valueat-Risk is 8.76 yuan with 1% confidence. Our results demonstrate that this methodology could be applied to the risk management.