dc.contributor.author | Van Dyk, Jenni | |
dc.contributor.author | Lange, Jaun | |
dc.contributor.author | Van Vuuren, Gary | |
dc.date.accessioned | 2018-06-11T12:41:25Z | |
dc.date.available | 2018-06-11T12:41:25Z | |
dc.date.issued | 2017 | |
dc.identifier.citation | Van Dyk, J. et al. 2017. The impact of systemic loss given default on economic capital. International business & economics research journal, 16(2):87-100. [https://doi.org/10.19030/iber.v16i2.9884 ] | en_US |
dc.identifier.issn | 1535-0754 | |
dc.identifier.issn | 2157-9393 (Online) | |
dc.identifier.uri | http://hdl.handle.net/10394/27395 | |
dc.identifier.uri | https://doi.org/10.19030/iber.v16i2.9884 | |
dc.identifier.uri | https://clutejournals.com/index.php/IBER/article/view/9884 | |
dc.description.abstract | Empirical studies have demonstrated that loan default probabilities (PD) and loss given defaults (LGD) are positively
correlated because of a common, business cycle, dependency. Regulatory capital requirements demand that banks use
downturn LGD estimates because the correlation between PD and LGD is not captured. Economic capital models are
not bound by this constraint. We extend and implement a model which captures the PD and LGD correlation by
exploring the link between defaults and recoveries from a systemic point of view. We investigate the impact of
correlated defaults and resultant loss rates on a portfolio comprising default-sensitive financial instruments. We
demonstrate that the systemic component of recovery risk (driven by macroeconomic conditions) exerts greater
influence on loss estimation and fair risk pricing than its standalone component | en_US |
dc.language.iso | en | en_US |
dc.publisher | Klute Institute | en_US |
dc.subject | Probability of default | en_US |
dc.subject | Loss given default | en_US |
dc.subject | Correlation | en_US |
dc.subject | Economic capital | en_US |
dc.subject | Expected loss | en_US |
dc.title | The impact of systemic loss given default on economic capital | en_US |
dc.type | Article | en_US |
dc.contributor.researchID | 12001333 - Van Vuuren, Gary Wayne | |