Modeling a Distribution of Mortgage Credit Losses

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F67985556%3A_____%2F12%3A00385822" target="_blank" >RIV/67985556:_____/12:00385822 - isvavai.cz</a>
Alternative codes found
RIV/00216208:11230/12:10295843
Result on the web
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DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Modeling a Distribution of Mortgage Credit Losses
Original language description
In our paper, we focus on the credit risk quantification methodology. We demonstrate that the current regulatory standards for credit risk management are at least not perfect. Generalizing the well-known KMV model, standing behind Basel II, we build a model of a loan portfolio involving a dynamics of the com- mon factor, influencing the borrowers? assets, which we allow to be non-normal. We show how the parameters of our model may be estimated by means of past mortgage delinquency rates. We give statistical evidence that the non-normal model is much more suitable than the one which assumes the normal distribution of risk factors. We point out in what way the assumption that risk factors follow a normal distribution can be dangerous. Especially during volatile periods compa- rable to the current crisis, the normal-distribution-based methodology can under- estimate the impact of changes in tail losses caused by underlying risk factors.
Czech name
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Czech description
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Type
J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)
CEP classification
AH - Economics
OECD FORD branch
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Project
Result was created during the realization of more than one project. More information in the Projects tab.
Continuities
Z - Vyzkumny zamer (s odkazem do CEZ)<br>I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year
2012
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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