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Granularity adjustment for Regulatory Capital Assessment
Company: International Journal of Central Banking
Company Url: Click here to open
Year Of Publication: 2013
Month Of Publication: September
Resource Link: Click here to open
Pages: 40
Download Count: 10
View Count: 2680
Comment Num: 0
Language: English
Source: article
Who Can Read: Free
Date: 5-20-2010
Publisher: Administrator
Summary
The credit value-at-risk model underpinning the internal ratings-based approach of Basel II and III assumes that idiosyncratic risk has been fully diversified in the portfolio, so that economic capital depends only on systematic risk contributions. We propose a simple granularity adjustment (GA) for approximating the effect of undiversified idiosyncratic risk on required capital. To mitigate operational burden in implementation, we derive upper and lower bounds on the GA under incomplete information on the portfolio. We assess the magnitude and accuracy of the proposed GA on a set of bank portfolios drawn from the German credit register.
(volume 9, number 4)
This document may be downloaded without charge from the publisher by clicking the "Buy from Publisher" button. (accessed 2013-09-02)
Author(s)
Gordy, Michael Sign in to follow this author
Luetkebohmert, Eva Sign in to follow this author
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