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Sample dependency during unconditional credit capital estimation

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  • Ferrer, Alex
  • Casals, José
  • Sotoca, Sonia

Abstract

The unconditional credit loss distribution is identified based on a long-term sample. This sample influences the capital estimate. In this study, we performed an empirical investigation of this sample dependency problem using charge-off data and by focusing on the influence of the Great Recession. The results demonstrated the significant dependency of the capital requirements on the homogeneity and cyclicality of the long-term sample. Thus, a sample containing only the Great Recession data produced lower capital requirements due to the homogeneity effect, whereas a mixed sample containing the Great Recession data produced higher capital requirements due to the cyclical effect.

Suggested Citation

  • Ferrer, Alex & Casals, José & Sotoca, Sonia, 2015. "Sample dependency during unconditional credit capital estimation," Finance Research Letters, Elsevier, vol. 15(C), pages 175-186.
    • Handle: RePEc:eee:finlet:v:15:y:2015:i:c:p:175-186
    DOI: 10.1016/j.frl.2015.09.008
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    1. Cho, Yongbok & Lee, Yongwoong, 2022. "Asymmetric asset correlation in credit portfolios," Finance Research Letters, Elsevier, vol. 49(C).

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    More about this item

    Keywords

    Charge-off; Credit risk; Unconditional capital; Unconditional credit loss distribution;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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