Calculation of default probability (PD) solving Merton Model PDEs on sparse grids

Author

Schroeder, Philipp ; Wittum, Gabriel

Author_Institution

Goethe-Center for Sci. Comput., Goethe-Univ., Frankfurt am Main, Germany

fYear

2009

fDate

23-29 May 2009

Firstpage

1

Lastpage

6

Abstract

Actual developments of the sub-prime crisis of 2008 have put a strong focus on the importance of credit default models. The Merton Model is one of these models, using partial differential equations to calculate the probability of default (PD) for a correlated credit portfolio. The resulting equations are discretized on structured sparse grids through the method of Finite-Differences and numerically solved using the software package SG2. Parallel Computing is used to speed up the calculations.

Keywords

credit transactions; finite difference methods; grid computing; parallel processing; partial differential equations; probability; SG2 software package; correlated credit portfolio; credit default model; default probability solving Merton model PDE; finite differences; parallel computing; partial differential equation; sparse grids; Banking; Finite difference methods; Parallel processing; Partial differential equations; Portfolios; Pricing; Probability; Risk management; Scientific computing; Software packages;

fLanguage

English

Publisher

ieee

Conference_Titel

Parallel & Distributed Processing, 2009. IPDPS 2009. IEEE International Symposium on

Conference_Location

Rome

ISSN

1530-2075

Print_ISBN

978-1-4244-3751-1

Electronic_ISBN

1530-2075

Type

conf

DOI

10.1109/IPDPS.2009.5161149

Filename

5161149