The Optimization Of Loan Portfolio With Default Correlation Based On Copula

In this paper, based on the copula,the loans portfolio selection problem with de-fault correlation is investigated,namely how to allocate a reasonable proportion offunds to reduce portfolio risk and improve portfolio returns. The first chapter intro-duces the background of the research question and the basic knowledge about creditrisk and the overview of research at home and aboard;the second chapter introducesthe definition of copula and its basic properties,as well as several commonly used cop-ula functions;the third chapter starts from the probability transition matrix, inducesthe Q-matrix in the previous studies and receives the single default probability in thetime-homogeneous case, and links the single default probabilities to joint default prob-ability with copula functions;the fourth chapter is the focus of this paper,namely, theoptimization of the loans portfolio, including Markowitz model ,the probability crite-ria optimization model and the Omega measure optimization model. The numericalexamples are given.