Gordy, M. B.; Lutkebohmert, E. - In: International Journal of Central Banking 9 (2013) 3, pp. 38-77
The credit value-at-risk model underpinning the internal ratings-based approach of Basel II and III assumes that idiosyncratic risk has been fully diversified in the portfolio, so that economic capital depends only on systematic risk contributions. We propose a simple granularity adjustment (GA)...