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Stress Testing Credit Risk: Is the Czech Republic Different from Germany?
Company: Czech National Bank
Company Url: Click here to open
Year Of Publication: 2008
Month Of Publication: December
Pages: 42
Download Count: 16
View Count: 1936
Comment Num: 0
Language: English
Source: working paper
Who Can Read: Free
Date: 6-14-2010
Publisher: Administrator
This study deals with credit risk modelling and stress testing within the context of a
Merton-type one-factor model. We analyse the corporate and household sectors of the
Czech Republic and Germany to find determining variables of credit risk in both
countries. We find that a set of similar variables explains corporate credit risk in both
countries despite substantial differences in the default rate pattern. This does not
apply to households, where further research seems to be necessary. Next, we establish
a framework for the stress testing of credit risk. We use a country specific stress
scenario that shocks macroeconomic variables with medium severity. The test results
in credit risk increasing by more than 100% in the Czech Republic and by roughly
40% in Germany. The two outcomes are not fully comparable since the shocks are
calibrated according to the historical development of the time series considered and
the size of the shocks for the Czech Republic was driven by the
Schmieder, Christian Sign in to follow this author
Jakubik, Petr Sign in to follow this author
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