Template-type: ReDIF-Paper 1.0
Author-Name: Alejandro Ferrer Pérez
Author-Email: af.econres@gmail.com
Author-Workplace-Name: Facultad de Ciencias Económicas. Universidad Complutense de Madrid.
Author-Name: José Casals Carro
Author-Workplace-Name: Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa). Universidad Complutense de 
	Madrid.
Author-Name: Sonia Sotoca López
Author-Email: sotoca@ccee.ucm.es
Author-Workplace-Name: Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa). Universidad Complutense de 
	Madrid.
Title: Linking the problems of estimating and allocating unconditional capital 
Abstract: This paper addresses two problems related to determining the unconditional capital required by a credit 
	portfolio: Estimating it using Monte Carlo simulation and allocating it among the different risk units 
	that form the portfolio. By elaborating on a tractable analytical framework, we propose a new simulation 
	algorithm and a new allocation method. Both contributions rely on the conditional loss distributions and 
	share the same core idea. We discuss their optimality, consistence and practical advantages. In an 
	empirical study based on American data, we show the remarkable gains in efficiency achieved by the former 
	and the improvement in the standard variance-covariance allocation provided by the latter.
Classification-JEL: C58, G17, G21, G32.

Keywords: Default risk, Capital estimation, Capital allocation, Unconditional measurement, Conditional measurement.

Length: 12 pages
Creation-Date: 2014-06  
Number: 2014-13 
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1413.txt
File-URL: https://eprints.ucm.es/id/eprint/25741/1/1413.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1413