Ferrer, AlexCasals Carro, JoséSotoca López, Sonia2023-06-182023-06-1820161544-613110.1016/j.frl.2015.10.010https://hdl.handle.net/20.500.14352/23628We address the problem of determining the unconditional capital required by a credit portfolio using Monte Carlo simulation. By elaborating on a tractable analytical framework, we propose a new efficient simulation algorithm that overweights recession periods, which are the most important periods for determining the final capital figure, thereby improving its efficiency for a given number of simulations. We discuss the optimality and practical advantages of this algorithm. We also conduct an empirical analysis based on American charge-off data, which shows that the proposed algorithm achieves remarkable improvements in efficiency, without introducing any bias and at a negligible implementation cost.engjournal articlehttp://dx.doi.org/10.1016/j.frl.2015.10.010restricted accessC58G17G21G32Capital estimationCharge-offCredit riskMonte Carlo simulationUnconditional capitalEconomía financieraBancos y cajasEconometría (Economía)5302 Econometría