Abstract
According to the new capital adequacy framework (Basel II) the Basel Committee on Banking Supervision (BCBS) strongly advices banks to investigate the relationship between default rates and values of collaterals of secured loan portfolios. This is caused by the fact that the values of collaterals are expected to decline with rising defaults. However, the literature on modelling and examining this effect is rather rare. Therefore, we present a framework based on the Internal Ratings Based (IRB) approach of Basel II in order to examine such dependencies using standard econometric tests. We apply it to insolvency rates and empirical data for physical assets.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
BASEL COMMITTEE ON BANKING SUPERVISION (1999): A New Capital Adequacy Framework. Bank for International Settlements.
BASEL COMMITTEE ON BANKING SUPERVISION (2005a): International Convergence of Capital Measurement and Capital Standards. Bank for International Settlements.
BASEL COMMITTEE ON BANKING SUPERVISION (2005b): Guidance on Paragraph 468 of the Framework Document. Bank for International Settlement.
BASEL COMMITTEE ON BANKING SUPERVISION (2005c): An Explanatory Note on the Basel II IRB Risk Weight Functions. Bank for International Settlement.
FRANKE, J., HÄRDLE, W. and HAFNER, C.M. (2004): Statistics of Financial Markets. Springer, Berlin.
FRYE, J. (2000a): Collateral Damage. Risk, 13,4, 91–94.
FRYE, J. (2000b): Depressing Recoveries. Risk, 13,11, 108–111.
GORDY, M. (2003): A Risk-Factor Model Foundation for Ratings-Based Bank Capital Rules. Journal of Financial Intermediation, 12, 199–232.
GREENE, W.H. (2003): Econometric Analysis. Prentice Hall, New Jersey.
GÜRTLER, M. and HEITHECKER, D. (2006): Modellkonsistente Bestimmung des LGD im IRB-Ansatz von Basel II. Zeitschrift für betriebswirtschaftliche Forschung, 58, 554–587.
HAMERLE, A. and RÖSCH, D. (2004): Parameterizing Credit Risk Models. Working Paper. www.defaultrisk.com.
HAMILTON, J.D. (1994): Time Series Analysis. Prentice Hall, New Jersey.
KOYLUOGLU, H.U. and HICKMAN, A. (1998): Reconcilable Differences. Risk, 11,10, 56–62.
PYKHTIN, M. (2003): Unexpected Recovery. Risk, 16,8, 74–78.
VASICEK, O.A. (2002): Loan Portfolio Value. Risk, 15,12, 160–162.
WAGATHA, M. (2004): Kointegrationskonzepte für die Kreditrisikomodellierung. DUV, Wiesbaden.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2007 Springer-Verlag Berlin Heidelberg
About this paper
Cite this paper
Gürtler, M., Heithecker, D., Olboeter, S. (2007). Credit Risk of Collaterals: Examining the Systematic Linkage between Insolvencies and Physical Assets in Germany. In: Decker, R., Lenz, H.J. (eds) Advances in Data Analysis. Studies in Classification, Data Analysis, and Knowledge Organization. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-70981-7_61
Download citation
DOI: https://doi.org/10.1007/978-3-540-70981-7_61
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-70980-0
Online ISBN: 978-3-540-70981-7
eBook Packages: Mathematics and StatisticsMathematics and Statistics (R0)