Preferencje help
Widoczny [Schowaj] Abstrakt
Liczba wyników
2006 | Mathematical, econometrical and computational methods in finance and insurance | 149--156
Tytuł artykułu

Default Correlation: an Empirical Approach

Warianty tytułu
Języki publikacji
The default probability (PD) and default correlation are the key drivers for credit risk in a bank loan portfolio. While there exist many models for estimating the default probability there is still a lot of research to do for estimating the default correlation. The default correlation is a measure for the sensitivity of the PD to the systematic risk factor which represents the state of the economy. If two companies have a strong dependency on the same systematic risk factors then they have a higher default correlation. In the one- -factor risk model the correlation is a measure for the joint dependency of companies on one systematic risk factor The joint default probability is the probability that two companies default at the same time horizon. The new Basel Accord (Basel II) assumes that the correlation of a company with turnover between € 5 and € 50 million increases exponential to the size of the firm and that the default correlation decline with the PD. In this paper the correlation of 110 000 Austrian small and medium-sized enterprises (SME) will be estimated empirical with time series of defaults. The non-parametric probit ordered model by Gordy is used for the calculation of the asset correlation, After estimating the asset correlation it is possible to calculate the default correlation analytically. (fragment of text)
  • University of Applied Sciences BFI Vienna, Austria
  • BIS, International Convergence of Capital Measurement and Capital Standards, June 2004.
  • Dietsch M., Petey J.: Should SME Exposures be Treated as Retail or Corporate Exposures? A Comparative Analysis of Default Probabilities and Asset Correlations in French and German SMEs. "Journal of Banking & Finance" 2004, Vol. 28, Iss. 4, April.
  • Gersbach H., Lipponer A.: The Correlation Effect. Working Paper, University of Heidelberg 2000.
  • Gordy M.B.: A Comparative Anatomy of Credit Risk Models. "Journal of Banking & Finance" 2000, Vol. 24, Iss. 1-2, January.
  • Merton R.: On the Pricing of Corporate Debt: The Risk Structur of Interest Rates. "The Journal of Finance" 1974, Vol. 29.
  • Rosch D.: Correlations and Business Cycles of Credit Risk: Evidence from Bankruptcies in Germany. "Financial Markets and Portfolio Management" 2003, Vol. 17, Iss. 3.
  • Schonbucher P.J.: Credit Derivatives Pricing Models. John Wiley & Sons, UK 2003.
  • Servigny A., Renault O.: Default Correlation: Empirical Evidence. Working Paper, Standard & Poors, 2002.
Typ dokumentu
Identyfikator YADDA

Zgłoszenie zostało wysłane

Zgłoszenie zostało wysłane

Musisz być zalogowany aby pisać komentarze.
JavaScript jest wyłączony w Twojej przeglądarce internetowej. Włącz go, a następnie odśwież stronę, aby móc w pełni z niej korzystać.