How to establish weights in creditDefaultCopula object

Question

Alexandra 2023-3-23

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https://ww2.mathworks.cn/matlabcentral/answers/1933895-how-to-establish-weights-in-creditdefaultcopula-object

回答： Nikhilesh 2023-3-27

Hello!

In Risk Manangement Toolbox is available an object named creditDefaultCopula which help us to create a multifactor credit model.

Currently, I have a portfolio for which i know the input arguments: EAD, PD and LGD. The fourth input arguments of the object, weights is ambiguous described in official documentation of Help, when it comes to its purpose and, especially, the way its values are given.

I have currently set some weights, rather judgmental, based on the industry GVA (and on the geographical region), but I do not know how to insure the validity (statistically especially, from the model perspective) of this approach.

I would apriciate if you can provide me more detailed examples explained from an economical and statistical point of view.

Thank you!