Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or... – Finance
Patent
1998-02-12
2000-06-20
MacDonald, Allen R.
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Finance
705 38, G06F 1760
Patent
active
060789034
ABSTRACT:
A method executed by a computer under the control of a program includes the steps of storing financial portfolio data in the computer. The financial portfolio data includes data on a loan representing a liability of a specified entity. A horizon date is selected for the loan. A distribution function is then designated to characterize the probability of different market values for the specified entity at the horizon date. A horizon default point threshold is then adjusted at the horizon date until the area bound by the distribution function, the horizon date, and the horizon default point threshold is equal to a horizon date cumulative default rate for the specified entity. A maturity date is also defined for the loan. A final default point threshold is then determined at the maturity date so that an expected default rate from the horizon date to the maturity date is equal to a maturity date cumulative default rate, less the horizon date cumulative default rate. Once the horizon default point threshold and the maturity default point threshold are defined in this manner, a number of input parameters can be derived for further financial portfolio analyses. The portfolio analyses include loan value correlations between affiliated entities.
REFERENCES:
El Jahel, Lina, WIlliam Perraudin, & Peter Sellin, "Value At Risk", Quarterly Review--Sveriges Riksbank, pp. 1-7, 1998.
Gupton, Greg M., "The New Talk of the Town: CreditMetrics, a Credit Value-at-Risk Approach", The Journal of Lending & Credit Risk Management, v. 79, n. 12, p. 44(11), Aug. 1997.
Hentschel, Ludger & Clifford W. Smith, Jr., "Risks in Derivatives Markets: Implications for the Insurance Industry", The Journal of Risk and Insurance, v. 64, pp. 323-345, Jun. 1997.
Falloon, "A Wealth of Stealth", Risk, vol. 6, No. 7, Jul. 1993.
"CreditMetrics--Technical Document", J.P. Morgan & Co., Incorporated, Apr. 2, 1997.
"Introduction to CreditMetrics", J.P. Morgan & Co., Incorporated, Apr. 2, 1997.
Galliani William S.
KMV Development LP
MacDonald Allen R.
Meinecke-Diaz Susanna
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