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This paper finds out that the risk exposure of a trader subject to a VaR limit is always lower than that of an unconstrained trader and that the probability of extreme losses is also lower.
Bei der Kreditrisikobewertung müssen die Parameter Ausfallwahrscheinlichkeit und korrelation geschätzt werden. Diese Schätzung erfolgt unter Unsicherheit. In der Literatur werden asymptotische Konfidenzregionen diskutiert, um diese Unsicherheit bei der simultanen Schätzung beider Parameter...
The current financial market crisis has impressively demonstrated the importance of an effective credit risk management for financial institutions. At the same time, the use and the valuation of credit derivatives has been widely criticised as a result of the crisis. Over the past decade, credit...
The use of probability of default estimates to assess the risks of a credit portfolio should not ignore estimation uncertainty. The latter can be quantified by confidence intervals. But assumptions about dependencies of these intervals are inconsistent with assumptions of conventional credit...
This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...
Using a unique data set on German banks' sector specific loan exposures to the real economy and the corresponding write-offs and write-downs, we examine the impact of loan portfolio sector concentration on credit risk. By controlling for common risk factors, we separate the bank-specific...
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,...
Lending specialization on certain industry sectors can have opposing effects on monitoring (including screening) abilities and on the sectoral concentration risk of a credit portfolio. In this paper, we examine in the first part if monitoring abilities of German cooperative banks and savings...
Auf Grundlage der Portfolio selection-Theorie kommt dieser Beitrag zu dem Ergebnis, dass das einzelbetriebliche Risiko in der Landwirtschaft Nordwest-Kasachstans als ein Hauptgrund für geringen Kreditzufluss angesehen werden muss. Ein quadratisches Programmierungsmodell wurde verwendet, um (a)...
In this paper, we investigate how investors who face both equity risk andcredit risk would optimally allocate their financial wealth in a dynamic continuous-time setup. We model credit risk through the defaultable zero-coupon bond and solve the dynamics of its price after pricing it. Using...