Credit Portfolio Models & BIS ASRF Model

[mikey10011]

Is the BIS Asymptotic Single Risk Factor (ASRF) model a credit portfolio model (e.g., KMV Portfolio Manager, CreditMetrics, CreditPortfolioView, Credit+)?

If so is the difference that ASRF only assumes systemic risk as expressed as a single systemic risk *correlation* factor in the IRB risk weight function?

Also I can't seem to google S&P;'s Portfolio Risk Tracker. Has S&P;rebranded it? [Note that de Servigny & Renault were formerly affiliated with S&P;.]

 

[David Harper CFA FRM]

Mikey,

Yes, I think it is fair to call the ASRF a credit portfolio model and therefer in the same general class as the others. However, it would be the simplest (most naive) in the group. What you say is exactly true: "is the difference that ASRF only assumes systemic risk as expressed as a single systemic risk *correlation* factor in the IRB risk weight function"

It (barely) qualifies as a portfolio model only because it has a single factor (correlation to the "macroeconomic variable"); the ASRF converts an individual expected loss (EL) to unexpected loss based on the loan's shared correlation, and this conversion itself is to aspirationally treat the loan as "within a credit portfolio" (to give it credit for portfolio diversification). It has features that resembles features of some of the real models; i.e., structural approach of KMV and, arguably, the shared correlations (to systemic factors ) in CreditMetrics. So, if the criteria bar for membership in the credit risk portfolio club is set really low (treat the loan like it's in some kind of portfolio), then ASRF qualifies. But, at the same time, I don't think you can call it a full-featured model in the sense of the others. It's borne of total convenience and has no real features or functionality that attempts to meaningfully incorporate additional factors. It's whole purpose is convenience; e.g., it is "single factor," unlike the others which are multi-factor, exactly because BIS wanted something that could conveniently ignore the portfolio characteristics (portfolio invariance).

i'd summarize thusly: they are strictly all credit portfolio models. But the others are full-featured models while ASRF is not much more than a formula with some rules for the inputs.

In regard to S&P;PRT, candidly I do not understand the current status (I've worked the the other firm, not this one...). Perhaps it has been folded into the S&P;product line? . It's funny b/c everything i read gives it passing mention but no detail (i just finished altman's new book and like everyone else, he mentions it but no details)..

David