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Double Impact: Credit Risk Assessment and Collateral Value
Year Of Publication: 2004
Month Of Publication: February
Pages: 17
Download Count: 39
View Count:
Comment Num: 0
Language: EN
Source: working paper
Who Can Read: Free
Date: 3-15-2005
Publisher: Administrator
Summary
This paper deals with credit portfolio risk analysis. The benchmark Basel II IRB approach relies on the independence between losses given defaults and default events. Nevertheless, empirical evidence shows that recovered values are likely to be lower when the number of defaults increases, such as in recession periods. We consider a model embedding Basel II that allows to deal with dependence between recovery rates and default events. We then study loss distributions for large credit portfolios. We show that both expected credit losses and standard risk measures such as credit VaR or Expected Shortfall tend to increase compared with the Basel II approach.
Author(s)
Chabaane, Ali Sign in to follow this author
Laurent, Jean-Paul Sign in to follow this author
Salomon, Julien Sign in to follow this author
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