Hybrid Monte Carlo-Methods in Credit Risk Management

preprint2014arXivOpen access

Abstract

In this paper we analyze and compare the use of Monte Carlo, Quasi-Monte Carlo and hybrid Monte Carlo-methods in the credit risk management system Credit Metrics by J.P.Morgan. We show that hybrid sequences used for simulations, in a suitable way, in many relevant situations, perform better than pure Monte Carlo and pure Quasi-Monte Carlo methods, and they essentially never perform worse than these methods.

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