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Witzany, Jiří - 2009

The paper proposes a new method to estimate correlation of account level Basle II Loss Given Default (LGD). The … correlation determines the probability distribution of portfolio level LGD in the context of a copula model which is used to … we apply the maximum likelihood method to estimate the best correlation parameter. The method is applied and analyzed on …

Persistent link: https://www.econbiz.de/10010322333

Loss, default and loss given default modeling

Witzany, Jiří - 2009

The goal of the Basle II regulatory formula is to model the unexpected loss on a loan portfolio. The regulatory formula is based on an asymptotic portfolio unexpected default rate estimation that is multiplied by an estimate of the loss given default parameter. This simplification leads to a...

Persistent link: https://www.econbiz.de/10010322310

Interaction of market and credit risk: an analysis of inter-risk correlation and risk aggregation

Hillebrand, Martin; Böcker, Klaus - 2008

analytically calculate their interrisk correlation and show how inter-risk correlation bounds can be derived. Moreover, we … particular, we suggest estimators for the correlation parameter of the Gaussian copula that can be used for general credit … behandelt die Diversifikation innerhalb einer Risikoart (z.B. Markt- oder Kreditrisiko), wohingegen Interrisiko …

Persistent link: https://www.econbiz.de/10010295948

Default probabilities and default correlations

Erlenmaier, Ulrich; Gersbach, Hans - 2001

Starting from the Merton framework for firm defaults, we provide the analytics and robustness of the relationship between default correlations. We show that loans with higher default probabilities will not only have higher variances but also higher correlations between loans. As a consequence,...

Persistent link: https://www.econbiz.de/10010301737

Incorporating prediction and estimation risk in point-in-time credit portfolio models

Hamerle, Alfred; Knapp, Michael; Liebig, Thilo; … - 2005

parameters for the estimation of probability of default or asset correlation are not available, and usually have to be estimated …

Persistent link: https://www.econbiz.de/10010295906

Endogenous credit derivatives and bank behavior

Pausch, Thilo - 2007

Instruments for credit risk transfer arise endogenously from and interact with optimizing behavior of their users. This is particularly true with credit derivatives which are usually OTC contracts between banks as buyers and sellers of credit risk. Recent literature, however, does not account...

Persistent link: https://www.econbiz.de/10010295935

A Note on Hedging a Loan Portfolio

Welzel, Peter; Broll, Udo - 2003

In the framework of the industrial economics approach to banking we extend the analysis of hedging against default on loans to the case of two types of credit risk. Standard results on the optimal hedge volume and the hedging effectivity from the single?risk case are shown to carry over to the...

Persistent link: https://www.econbiz.de/10010263007

Survival analysis in LGD modeling

Witzany, Jiří; Rychnovský, Michael; Charamza, Pavel - 2010

The paper proposes an application of the survival time analysis methodology to estimations of the Loss Given Default (LGD) parameter. The main advantage of the survival analysis approach compared to classical regression methods is that it allows exploiting partial recovery data. The model is...

Persistent link: https://www.econbiz.de/10010322331

Asset correlations and credit portfolio risk: an empirical analysis

Düllmann, Klaus; Scheicher, Martin; Schmieder, Christian - 2007

In credit risk modelling, the correlation of unobservable asset returns is a crucial component for the measurement of …,000 European firms from 1996 to 2004. We compare correlation and value-atrisk (VaR) estimates in a one-factor or market model and a …

Persistent link: https://www.econbiz.de/10010295932

Stress testing German banks in a downturn in the automobile industry

Düllmann, Klaus; Erdelmeier, Martin - 2009

increase in expected loss is driven mainly by correlation effects with related industry sectors. Therefore, credit risk …

Persistent link: https://www.econbiz.de/10010298778