Default risk: Poisson mixture and the business cycle
As emphasized by the introduction of Basel II, the macroeconomic factors strongly affect credit risk variables. In order to account for the business cycle in a forward-looking way, a macroeconomic forecast can be introduced in the estimation of credit risk variables. This work proposes to model the distribution of the default rate as a mixture distribution which accounts for a binary representation of the business cycle: the distribution changes according to the estimated probability of recession over the credit horizon considered.
|Date of creation:||Jun 2007|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.economia.unimore.it|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- M Sensier & M Artis & C R Birchenhall & D R Osborn, 2002.
"Domestic and International Influences on Business Cycle Regimes in Europe,"
The School of Economics Discussion Paper Series
0202, Economics, The University of Manchester.
- Sensier, Marianne & Artis, Michael & Osborn, Denise R. & Birchenhall, Chris, 2004. "Domestic and international influences on business cycle regimes in Europe," International Journal of Forecasting, Elsevier, vol. 20(2), pages 343-357.
- M Sensier & M Artis & C R Birchenhall & D R Osborn, 2002. "Domestic and International Influences on Business Cycle Regimes in Europe," Centre for Growth and Business Cycle Research Discussion Paper Series 11, Economics, The Univeristy of Manchester.
- Bangia, Anil & Diebold, Francis X. & Kronimus, Andre & Schagen, Christian & Schuermann, Til, 2002.
"Ratings migration and the business cycle, with application to credit portfolio stress testing,"
Journal of Banking & Finance,
Elsevier, vol. 26(2-3), pages 445-474, March.
- Anil Bangia & Francis X. Diebold & Til Schuermann, 2000. "Ratings Migration and the Business Cycle, With Application to Credit Portfolio Stress Testing," Center for Financial Institutions Working Papers 00-26, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Claudio Borio & Craig Furfine & Philip Lowe, 2001. "Procyclicality of the financial system and financial stability: issues and policy options," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 1-57 Bank for International Settlements.
- Pederzoli, Chiara & Torricelli, Costanza, 2005. "Capital requirements and business cycle regimes: Forward-looking modelling of default probabilities," Journal of Banking & Finance, Elsevier, vol. 29(12), pages 3121-3140, December.
- Nickell, Pamela & Perraudin, William & Varotto, Simone, 2000.
"Stability of rating transitions,"
Journal of Banking & Finance,
Elsevier, vol. 24(1-2), pages 203-227, January.
- Arturo Estrella & Frederic S. Mishkin, 1998.
"Predicting U.S. Recessions: Financial Variables As Leading Indicators,"
The Review of Economics and Statistics,
MIT Press, vol. 80(1), pages 45-61, February.
- Arturo Estrella & Frederic S. Mishkin, 1996. "Predicting U.S. recessions: financial variables as leading indicators," Research Paper 9609, Federal Reserve Bank of New York.
- Arturo Estrella & Frederic S. Mishkin, 1995. "Predicting U.S. Recessions: Financial Variables as Leading Indicators," NBER Working Papers 5379, National Bureau of Economic Research, Inc.
- Arturo Estrella & Anthony P. Rodrigues & Sebastian Schich, 2000.
"How stable is the predictive power of the yield curve? evidence from Germany and the United States,"
113, Federal Reserve Bank of New York.
- Arturo Estrella & Anthony P. Rodrigues & Sebastian Schich, 2003. "How Stable is the Predictive Power of the Yield Curve? Evidence from Germany and the United States," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 629-644, August.
- Gordy, Michael B. & Howells, Bradley, 2006. "Procyclicality in Basel II: Can we treat the disease without killing the patient?," Journal of Financial Intermediation, Elsevier, vol. 15(3), pages 395-417, July.
- Giuseppe Marotta & Chiara Pederzoli & Costanza Torricelli, 2005. "Forward-looking estimation of default probabilities with Italian data," Heterogeneity and monetary policy 0504, Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica.
- Michael B. Gordy, 1998.
"A comparative anatomy of credit risk models,"
Finance and Economics Discussion Series
1998-47, Board of Governors of the Federal Reserve System (U.S.).
When requesting a correction, please mention this item's handle: RePEc:mod:wcefin:07052. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Giuseppe Marotta)
If references are entirely missing, you can add them using this form.