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Estimation of Regulatory Credit Risk Models

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  • Carlos Pérez Montes

    (Banco de España)

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    Abstract

    This 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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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/13/Fich/dt1305e.pdf
    File Function: First version, March 2013
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    Bibliographic Info

    Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1305.

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    Length: 42 pages
    Date of creation: Mar 2013
    Date of revision:
    Handle: RePEc:bde:wpaper:1305

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    Keywords: credit risk; default correlation; stress test; state space model; bootstrap; MLE;

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