/**
* Calculates losses for the given credit portfolio using Monte-Carlo Simulation. Simulates
* probability of default only.
*
* @param portfolio Credit portfolio.
* @param horizon Forecast horizon.
* @param num Number of Monte-Carlo iterations.
* @return Losses array simulated by Monte Carlo method.
*/
private double[] calculateLosses(Credit[] portfolio, int horizon, int num) {
double[] losses = new double[num];
// Count losses using Monte-Carlo method. We generate random probability of default,
// if it exceeds certain credit default value we count losses - otherwise count income.
for (int i = 0; i < num; i++)
for (Credit crd : portfolio) {
int remDays = Math.min(crd.getRemainingTerm(), horizon);
if (rndGen.nextDouble() >= 1 - crd.getDefaultProbability(remDays))
// (1 + 'r' * min(H, W) / 365) * S.
// Where W is a horizon, H is a remaining crediting term, 'r' is an annual credit rate,
// S is a remaining credit amount.
losses[i] +=
(1 + crd.getAnnualRate() * Math.min(horizon, crd.getRemainingTerm()) / 365)
* crd.getRemainingAmount();
else
// - 'r' * min(H,W) / 365 * S
// Where W is a horizon, H is a remaining crediting term, 'r' is a annual credit rate,
// S is a remaining credit amount.
losses[i] -=
crd.getAnnualRate()
* Math.min(horizon, crd.getRemainingTerm())
/ 365
* crd.getRemainingAmount();
}
return losses;
}
