Advanced Search
MyIDEAS: Login

A Two Factor Model for PD and LGD Correlation

Contents:

Author Info

  • Jiri Witzany

    ()

Abstract

The paper proposes a two systematic factor model to capture a retail portfolio probability of default (PD) and loss given default (LGD) parameters, in particular their mutual correlation. We argue that the standard one factor models standing behind the Basel II formula and used by a number of studies cannot capture well the correlation between PD and LGD on a large (asymptotic) portfolio. The proposed model is implemented on real banking data giving an estimate of a positive PD and LGD correlation implied by the model slightly above 10%.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://ces.utia.cas.cz/bulletin/index.php/bulletin/article/view/183
Download Restriction: no

Bibliographic Info

Article provided by The Czech Econometric Society in its journal Bulletin of the Czech Econometric Society.

Volume (Year): 18 (2011)
Issue (Month): 28 ()
Pages:

as in new window
Handle: RePEc:czx:journl:v:18:y:2011:i:28:id:183

Contact details of provider:
Email:
Web page: http://ces.utia.cas.cz
More information through EDIRC

Related research

Keywords: credit risk; recovery rate; loss given default; correlation; regulatory capital;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Petr Gapko & Martin Šmíd, 2012. "Dynamic Multi-Factor Credit Risk Model with Fat-Tailed Factors," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(2), pages 125-140, May.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:czx:journl:v:18:y:2011:i:28:id:183

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jozef Barunik).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.