M.A.R.C.: an Actuarial Model for Credit Risk

In this paper an actuarial model to quantify and manage credit risk is presented. The model has been named M.A.R.C. (Actuarial Model for Credit Risk). With the M.A.R.C. model we want to propose a general scheme useful for applying risk theory methods to credit portfolios. To this purpose we have built up a model based on stochastic simulation (Monte Carlo method); this technique gives to the model the necessary flexibility. Some numerical exercises are presented. In the last part of the paper some statistical methods to evaluate and manage the output of the proposed stochastic procedure are described and applied.

KEYWORDS: actuarial models for credit risk, default risk, risk theory, stochastic simulation.