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dc.contributor.authorVan Dyk, Jenni
dc.contributor.authorLange, Jaun
dc.contributor.authorVan Vuuren, Gary
dc.date.accessioned2018-06-11T12:41:25Z
dc.date.available2018-06-11T12:41:25Z
dc.date.issued2017
dc.identifier.citationVan 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.issn1535-0754
dc.identifier.issn2157-9393 (Online)
dc.identifier.urihttp://hdl.handle.net/10394/27395
dc.identifier.urihttps://doi.org/10.19030/iber.v16i2.9884
dc.identifier.urihttps://clutejournals.com/index.php/IBER/article/view/9884
dc.description.abstractEmpirical 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 componenten_US
dc.language.isoenen_US
dc.publisherKlute Instituteen_US
dc.subjectProbability of defaulten_US
dc.subjectLoss given defaulten_US
dc.subjectCorrelationen_US
dc.subjectEconomic capitalen_US
dc.subjectExpected lossen_US
dc.titleThe impact of systemic loss given default on economic capitalen_US
dc.typeArticleen_US
dc.contributor.researchID12001333 - Van Vuuren, Gary Wayne


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