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Inter-portfolio credit risk contagion including macroeconomic and financial factors: A case study for Ecuador

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  • Uquillas, Adriana
  • Tonato, Ronny

Abstract

Daily banking practice suggests that there may be contagion effects between portfolios, a fact that has been explicitly recognized through current regulation. This paper describes a model that distinguishes between delinquency in each portfolio and allows inter-portfolio credit risk contagion, including macroeconomic and financial factors. Also, multivariate scenarios regarding portfolios’ credit risks were simulated.

Suggested Citation

  • Uquillas, Adriana & Tonato, Ronny, 2022. "Inter-portfolio credit risk contagion including macroeconomic and financial factors: A case study for Ecuador," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 299-320.
    • Handle: RePEc:eee:ecanpo:v:73:y:2022:i:c:p:299-320
    DOI: 10.1016/j.eap.2021.11.006
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    More about this item

    Keywords

    Credit risk; Contagion; Cross risk; Stress testing models; Vector autoregressive models;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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