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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 2: Financial Markets and Risk Management I

SOE 2.2: Talk

Monday, March 26, 2012, 10:00–10:15, H 0110

A Random Matrix Approach to Credit Risk — Michael C. Münnix, •Rudi Schäfer, and Thomas Guhr — Fakultät für Physik, Universität Duisburg-Essen, Germany

We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. We use Random Matrix Theory to setup this ensemble. We demonstrate analytically that the presence of correlations severely limits the effect of diversification in a credit portfolio if the correlations are not identically zero. The existence of correlations alters the tails of the loss distribution considerably, even if their average is zero. Under the assumption of randomly fluctuating correlations, a lower bound for the estimation of the loss distribution is provided.