The single risk factor approach to capital charges in case of correlated loss given default rates

Preprint

14 February 2004

preprint
Published by arXiv in arXiv

Abstract

A new methodology for incorporating LGD correlation effects into the Basel II risk weight functions is introduced. This methodology is based on modelling of LGD and default event with a single loss variable. The resulting formulas for capital charges are numerically compared to the current proposals by the Basel Committee on Banking Supervision. Keywords: Regulatory capital charge, loss given default (LGD).

Keywords

FACTOR APPROACH
CAPITAL CHARGES
CORRELATED LOSS
SINGLE RISK
METHODOLOGY
KEYWORDS
CHARGES
BASEL
LGD

All Related Versions

Version 1, 2004-02-14, ArXiv
Version 2, 2004-02-18, ArXiv

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