Compute Incremental Risk Charge for a Bond Using Monte Carlo Simulation
Originally published: 22/06/2018 08:51
Publication number: ELQ-26701-1
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Compute Incremental Risk Charge for a Bond Using Monte Carlo Simulation

A prototype to compute the incremental risk charge (IRC) for a bond position using a novel monte carlo simulation.

Description
A prototype to calculate IRC for a Corporate Bond position that could well be extended to cover a portfolio of bonds in the trading book.

Follows the guidelines of BASEL and uses Structural Merton Model to compute the IRC of a single bond position. Includes stochastic simulation on asset value, spread curve generation.

Includes the provision of liquidity horizon, constant level of risk and a capital horizon of 1 year.

NOTE when opening the file please enter these codes.

Username: John
Password: Password1

This Best Practice includes
1 EXCEL MODEL, 1 POWER POINT FILE

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Further information

It gives the methodology and a prototype code to compute the incremental risk charge for a single bond position.

It should be programmed to include a portfolio of bonds preferably in a more sophisticated software environment

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  • J D
    I would like to see the VBA code for this project- what is the password?
    arrow_drop_uparrow_drop_downReply reply


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