Portfolio Sensitivity Model for Analyzing Credit Risk Caused by Structural and Macroeconomic Changes

Abstract

This paper proposes a new model for portfolio sensitivity analysis. The model is suitable for decision support in financial institutions, specifically for portfolio planning and portfolio management. The basic advantage of the model is the ability to create simulations for credit risk predictions in cases when we virtually change portfolio structure and/or macroeconomic factors. The model takes a holistic approach to portfolio management consolidating all organizational segments in the process such as marketing, retail and risk.

Keywords

• portfolio analysis
• credit risk
• weighting
• scoring
• data mining
• sensitivity analyses
• decision support
• Bayesian networks
• BASEL II