Portfolio Risk and Dependence Modeling

This paper has considered portfolio credit risk with a focus on two approaches, the factor model, and copula model. We have reviewed two models with emphasis on the joint default probably. The copula function describes the dependence structure of a multivariate random variable, in this paper, it used as a practical to simulation of generate portfolio with different copula, and we only used Gaussian and t¨Ccopula case. We generated portfolio default distributions and studied the sensitivity of commonly used risk measures with respect to the approach in modeling the dependence structure of the portfolio.