Simulation based approach for measuring concentration risk
Asymptotic Single Risk Factor (ASRF) model is used to derive the regulatory capital formula of Internal Ratings-Based approach in the new Basel accord (Basel II). One of the important assumptions in ASRF model for credit risk is that the given portfolio is well diversified so that one can easily calculate the required capital level by focusing only on systematic risk. In real world, however, idiosyncratic risk of a portfolio cannot be fully diversified away, causing the so called concentration risk problem. In this paper we suggest simulation based approach for measuring concentration risk using bank capital dynamic model. This approach is especially suitable for a portfolio with relatively small to medium number of obligors and relatively large sized loans
|Date of creation:||01 Feb 2007|
|Date of revision:||19 Apr 2007|
|Contact details of provider:|| Postal: |
Web page: https://mpra.ub.uni-muenchen.de
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.:
- Peura, Samu & Jokivuolle, Esa, 2004. "Simulation based stress tests of banks' regulatory capital adequacy," Journal of Banking & Finance, Elsevier, vol. 28(8), pages 1801-1824, August.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:2968. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.