Abstract
This paper quantifies the credit risk loss distribution of the Spanish financial system by introducing a general Monte Carlo importance sampling (IS) approach. We start obtaining all the required information for the Vasicek (1987) model. Then we quantify the loss distribution under the standard IS method introduced by Glasserman and Li (2005) and allocate the total risk over the different institutions in the Spanish financial system. We also extend the current IS framework to deal with more general assumptions like random recoveries and market valuation. Our results show that this approach can be very useful for banking supervisors from a macroprudential point of view and that the risk allocation can vary considerably depending on the valuation model under analysis.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
