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Loss Given Default Modelling under the Asymptotic Single Risk Factor Assumption

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  • Kim, Joocheol
  • Kim, KiHyung

Abstract

The proposals of the Basel Committee on Banking Supervision for the revision of minimum requirements for bank's risk capital leave the quanti¯cation of loss-given-default (LGD) parameter used for capital calculation unspeci¯ed. This paper proposes a new methodology for incorporating LGD parameter explicitly into the Basel risk weight function. Numerical examples based on the new methodology are compared to the current proposals of the Basel committee on Banking Supervision.

Suggested Citation

  • Kim, Joocheol & Kim, KiHyung, 2006. "Loss Given Default Modelling under the Asymptotic Single Risk Factor Assumption," MPRA Paper 860, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:860
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    File URL: https://mpra.ub.uni-muenchen.de/860/1/MPRA_paper_860.pdf
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    References listed on IDEAS

    as
    1. Gordy, Michael B., 2003. "A risk-factor model foundation for ratings-based bank capital rules," Journal of Financial Intermediation, Elsevier, vol. 12(3), pages 199-232, July.
    2. Gordy, Michael B., 2000. "A comparative anatomy of credit risk models," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 119-149, January.
    3. Dirk Tasche, 2004. "The single risk factor approach to capital charges in case of correlated loss given default rates," Papers cond-mat/0402390, arXiv.org, revised Feb 2004.
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    Cited by:

    1. Balogh Peter & BOLOCAN DRAGOS-MIHAIL, 2010. "The Management Of Credit Risk According To Internal Ratings- Based Approach," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 665-671, December.

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    More about this item

    Keywords

    LGD; Single Risk Factor; Basel;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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