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Discrete Dynamics in Nature and Society
Volume 2014 (2014), Article ID 597814, 9 pages
Research Article

Risk Measurement for Portfolio Credit Risk Based on a Mixed Poisson Model

1School of Finance, Zhejiang University of Finance and Economics, Hangzhou 310018, China
2Coordinated Innovation Center of Wealth Management and Quantitative Investment, Zhejiang University of Finance and Economics, Hangzhou 310018, China
3Center for Research of Regulation and Policy of Zhejiang Province, Hangzhou 310018, China

Received 19 February 2014; Accepted 28 April 2014; Published 22 May 2014

Academic Editor: Fenghua Wen

Copyright © 2014 Rongda Chen and Huanhuan Yu. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


Experiences manifest the importance of comovement and communicable characters among the risks of financial assets. Therefore, the portfolio view considering dependence relationship among credit entities is at the heart of risk measurement. This paper introduces a mixed Poisson model assuming default probabilities of obligors depending on a set of common economic factors to construct the dependence structure of obligors. Further, we apply mixed Poisson model into an empirical study with data of four industry portfolios in the financial market of China. In the process of model construction, the classical structural approach and option pricing formula contribute to estimate dynamic default probabilities of single obligor, which helps to obtain the dynamic Poisson intensities under the model assumption. Finally, given the values of coefficients in this model calculated by a nonlinear estimation, Monte Carlo technique simulates the progress of loss occurrence. Relationship between default probability and loss level reflected through the MC simulation has practical features. This study illustrates the practical value and effectiveness of mixed Poisson model in risk measurement for credit portfolio.