Transitional credit modelling and its relationship to market value at risk: an Australian sectoral perspective
AbstractInternal credit risk modelling is important for banks for the calculation of capital adequacy in terms of the Basel Accords, and for the management of sectoral exposure. We examine Credit Value at Risk (VaR), Conditional Credit Value at Risk (Credit CVaR) and the relationship between market and credit risk. Significant association is found between different Credit CVaR methods, and between market and credit risk. Simpler Credit CVaR methods are found to be viable alternatives to more complex methodology. The relationship between market and credit risk is used to develop a new model that allows banks to incorporate industry risk into transition modelling, without macroeconomic analysis. Copyright (c) The Authors. Journal compilation (c) 2009 AFAANZ.
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Bibliographic InfoArticle provided by Accounting and Finance Association of Australia and New Zealand in its journal Accounting & Finance.
Volume (Year): 49 (2009)
Issue (Month): 3 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0810-5391
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- Allen, David E & Powell, Robert, 2008. "Structural Credit Modelling and Its Relationship to Market Value at Risk: An Australian Sectoral Perspective," MPRA Paper 47206, University Library of Munich, Germany.
- Allen, D.E. & Kramadibrata, A.R. & Powell, R.J. & Singh, A.K., 2013. "Modelling tail credit risk using transition matrices," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 93(C), pages 67-75.
- repec:ecu:wpaper:2010-03 is not listed on IDEAS
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