Vasicek Variance Test

  PD     Correlation    

  Numerical Integration Result      

  Monte Carlo Simulation: Enter # Trials     Result      

The Vasicek distribution describes the probability density function for the fraction of defaulted loans within an infinitely diversified portfolio. Simple but restrictive assumptions specify a single default probability (PD) common to each loan and a single correlation parameter linking the behavior of all loans.

Variance Test: The numerical integration and Monte Carlo simulation are two viable methods to compute the variance of this Vasicek distribution - very important for understanding the risk of the loan portfolio!

Pool Test: Create an arbitrary number of pools with an arbitrary number of obligors per pool. Apply Monte Carlo simulation to determine fraction of defaults in each pool. Then compare to the analytical Vasicek distribution.


Vasicek Pool Test

  Enter # Pools       Enter # Obligors per Pool