International Journal of Economics, Finance and Management Sciences
Volume 1, Issue 6, December 2013, Pages: 406-412
Received: Dec. 11, 2013;
Published: Jan. 30, 2014
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Osei Antwi, Mathematics and Statistics Department, Accra Polytechnic, Accra-Ghana
Alice Constance Mensah, Mathematics and Statistics Department, Accra Polytechnic, Accra-Ghana
Martin Owusu Amoamah, Mathematics and Statistics Department, Accra Polytechnic, Accra-Ghana
Dadzie Joseph, Mathematics and Statistics Department, Accra Polytechnic, Accra-Ghana
This paper investigates the complexity involved in the quantitative measurement of Economic Capital and proposes simulation methods as a practical solution for obtaining the loss distribution of a portfolio of obligors. The paper examines a one factor model to generate loss distribution which establishes the necessary ingredients to measure the credit risk quantities in a loan portfolio. The general elements of credit risk modeling are outlined and then a specific model that employs a Monte Carlo simulation is developed. An example is provided that calculates the risk quantities in a loan portfolio from which the Economic Capital in a credit risk portfolio is obtained.
Alice Constance Mensah,
Martin Owusu Amoamah,
Measuring Economic Capital Using Loss Distributions, International Journal of Economics, Finance and Management Sciences.
Vol. 1, No. 6,
2013, pp. 406-412.
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