Credit portfolio loss forecasts for economic downturns

Rösch, D; Scheule, H

Credit portfolio loss forecasts for economic downturns

Rösch, D Scheule, H

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Publication Type:: Journal Article
Citation:: Financial Markets, Institutions and Instruments, 2009, 18 (1), pp. 1 - 26
Issue Date:: 2009-02-01

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Field	Value	Language
dc.contributor.author	Rösch, D	en_US
dc.contributor.author	Scheule, H https://orcid.org/0000-0001-7283-5654	en_US
dc.date.issued	2009-02-01	en_US
dc.identifier.citation	Financial Markets, Institutions and Instruments, 2009, 18 (1), pp. 1 - 26	en_US
dc.identifier.issn	0963-8008	en_US
dc.identifier.uri	http://hdl.handle.net/10453/29815
dc.description.abstract	Recent studies find a positive correlation between default and loss given default rates of credit portfolios. In response, financial regulators require financial institutions to base their capital on 'Downturn' loss rates given default which are also known as Downturn LGDs. This article proposes a concept for the Downturn LGD which incorporates econometric properties of credit risk as well as the information content of default and loss given default models. The concept is compared to an alternative proposal by the Department of the Treasury, the Federal Reserve System and the Federal Insurance Corporation. An empirical analysis is provided for US American corporate bond portfolios of different credit quality, seniority and security. © 2009 New York University Salomon Center and and Wiley Periodicals, Inc.	en_US
dc.relation.ispartof	Financial Markets, Institutions and Instruments	en_US
dc.relation.isbasedon	10.1111/j.1468-0416.2008.00145.x	en_US
dc.subject.classification	Finance	en_US
dc.title	Credit portfolio loss forecasts for economic downturns	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	18	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	closed_access
pubs.issue	1	en_US
pubs.publication-status	Published	en_US
pubs.volume	18	en_US

Abstract:

Recent studies find a positive correlation between default and loss given default rates of credit portfolios. In response, financial regulators require financial institutions to base their capital on 'Downturn' loss rates given default which are also known as Downturn LGDs. This article proposes a concept for the Downturn LGD which incorporates econometric properties of credit risk as well as the information content of default and loss given default models. The concept is compared to an alternative proposal by the Department of the Treasury, the Federal Reserve System and the Federal Insurance Corporation. An empirical analysis is provided for US American corporate bond portfolios of different credit quality, seniority and security. © 2009 New York University Salomon Center and and Wiley Periodicals, Inc.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/29815