Estimation of Regulatory Credit Risk Models
AbstractThis article estimates a general credit risk model with both macroeconomic and latent credit factors for Spanish banks during the period 2004-2010. The proposed framework allows to estimate with bank level data both the standard credit risk model of Basel II and generalized models. I fi nd evidence of persistence in the credit latent factor and of a signifi cant effect of GDP growth and interbank rates on loan default rates. The estimated default correlation is low across specifications. The model is also used to calculate the impact on the probabilities of default of stressed economic scenarios.
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Bibliographic InfoPaper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1305.
Length: 42 pages
Date of creation: Mar 2013
Date of revision:
credit risk; default correlation; stress test; state space model; bootstrap; MLE;
Find related papers by JEL classification:
- E0 - Macroeconomics and Monetary Economics - - General
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-06 (All new papers)
- NEP-BAN-2013-09-06 (Banking)
- NEP-MAC-2013-09-06 (Macroeconomics)
- NEP-RMG-2013-09-06 (Risk Management)
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