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Loan pricing, stress testing and capital allocation

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  • Jason Allen

Abstract

The present paper proposes an improved estimated approach for risk modelling processes of loan pricing, stress testing and capital allocation. The proposed estimation approach allows to reduce bias related to measurement errors in the risk scale. Further, compared to standard estimators, our approach allows to obtain more robust credit loss estimates in the risk modeling.

Suggested Citation

  • Jason Allen, 2017. "Loan pricing, stress testing and capital allocation," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 60(2), pages 39-64.
    • Handle: RePEc:eei:journl:v:60:y:2017:i:2:p:39-64
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    More about this item

    Keywords

    Credit risk; loan pricing; stress testing and capital allocation.;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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