ABSTRACT

Credit portfolio managers must be able to identify the interdependencies between
exposures in a portfolio and be able to relate credit risk to tangible portfolio effects
on which action could be taken. To these ends, this paper draws on the
macroeconometric vector error correcting model (VECM) developed by De Wet et
al. (2009) and applies the proposed methodology of Pesaran, Schuermann,
Treutler and Weiner (2006) to a dummy credit portfolio within the South African
economy. It illustrates the ability to link macroeconomic factors to a credit
portfolio, that scenario analysis can be performed and that portfolio management
and value enhancing applications can be pursued.