riskContribution

Generate risk contributions for each counterparty in portfolio

Syntax

Contributions = riskContribution(cmc)

Contributions = riskContribution(cmc,Name,Value)

Description

Contributions = riskContribution(cmc) returns a table of risk contributions for each counterparty in the portfolio. The risk Contributions table allocates the full portfolio risk measures to each counterparty, such that the counterparty risk contributions sum to the portfolio risks reported by portfolioRisk.

Note

When creating a creditMigrationCopula object, you can set the 'UseParallel' property if you have Parallel Computing Toolbox™. Once the 'UseParallel' property is set, parallel processing is used to compute riskContribution.

Before you use the riskContribution function, you must run the simulate function. For more information on using a creditMigrationCopula object, see creditMigrationCopula.

example

Contributions = riskContribution(cmc,Name,Value) adds an optional name-value pair argument for VaRWindow.

example

Examples

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Determine the Risk Contribution for Each Counterparty for a `creditMigrationCopula` Object

Open Live Script

Load the saved portfolio data.

load CreditMigrationData.mat;

Scale the bond prices for portfolio positions for each bond.

migrationValues = migrationPrices .* numBonds;

Create a creditMigrationCopula object with a four-factor model using creditMigrationCopula.

cmc = creditMigrationCopula(migrationValues,ratings,transMat,...
lgd,weights,'FactorCorrelation',factorCorr)

cmc = 
  creditMigrationCopula with properties:

            Portfolio: [250×5 table]
    FactorCorrelation: [4×4 double]
         RatingLabels: [8×1 string]
     TransitionMatrix: [8×8 double]
             VaRLevel: 0.9500
          UseParallel: 0
      PortfolioValues: []

Set the VaRLevel to 99%.

cmc.VaRLevel = 0.99;

Use the simulate function to simulate 100,000 scenarios, and then use the riskContribution function to generate the Contributions table.

cmc = simulate(cmc,1e5);
Contributions = riskContribution(cmc);
Contributions(1:10,:)

ans=10×5 table
    ID      EL       Std       VaR       CVaR 
    __    ______    ______    ______    ______

     1    15.521    41.153    238.72    279.18
     2      8.49    18.838    92.074    122.19
     3    6.0937    20.069    113.22    181.53
     4    6.6964    55.885    272.23    313.25
     5    23.583    73.905    360.32    573.39
     6    10.722    114.97    445.94    728.38
     7    1.8393    84.754    262.32    490.39
     8    11.711    39.768    175.84    253.29
     9    2.2154    4.4038    22.797    31.039
    10    1.7453    2.5545    9.8801    17.603

Input Arguments

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`cmc` — `creditMigrationCopula` object
object

creditMigrationCopula object obtained after running the simulate function.

For more information on creditMigrationCopula objects, see creditMigrationCopula.

Name-Value Arguments

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Specify optional pairs of arguments as Name1=Value1,...,NameN=ValueN, where Name is the argument name and Value is the corresponding value. Name-value arguments must appear after other arguments, but the order of the pairs does not matter.

Before R2021a, use commas to separate each name and value, and enclose Name in quotes.

Example: Contributions = riskContribution(cmc,'VaRWindow',0.3)

`VaRWindow` — Size of the window used to compute VaR contributions
`0.05` (default) | numeric between `0` and `1`

Size of the window used to compute VaR contributions, specified as the comma-separated pair consisting of 'VaRWindow' and a scalar numeric with a percent value. Scenarios in the VaR scenario set are used to calculate the individual counterparty VaR contributions.

The default is 0.05, meaning that all scenarios with portfolio losses within 5 percent of the VaR are included when computing counterparty VaR contributions.

Data Types: double

Output Arguments

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`Contributions` — Risk contributions
table

Risk contributions, returned as a table containing the following risk contributions for each counterparty:

EL — Expected loss for the particular counterparty over the scenarios
Std — Standard deviation of loss for the particular counterparty over the scenarios
VaR — Value at risk for the particular counterparty over the scenarios
CVaR — Conditional value at risk for the particular counterparty over the scenarios

The risk Contributions table allocates the full portfolio risk measures to each counterparty, such that the counterparty risk contributions sum to the portfolio risks reported by portfolioRisk.

More About

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