EconStor >
Deutsche Bundesbank, Forschungszentrum, Frankfurt am Main >
Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank >

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

http://hdl.handle.net/10419/19746
  
Title:Incorporating prediction and estimation risk in point-in-time credit portfolio models PDF Logo
Authors:Hamerle, Alfred
Knapp, Michael
Liebig, Thilo
Wildenauer, Nicole
Issue Date:2005
Series/Report no.:Discussion Paper, Series 2: Banking and Financial Supervision 2005,13
Abstract:In this paper we focus on the analysis of the effect of prediction and estimation risk on the loss distribution, risk measures and economic capital. When variables for the determination of probability of default and loss distribution have to be predicted because they are not available at the time the prediction is made, the prediction is prone to errors. The model parameters for the estimation of probability of default or asset correlation are not available, and usually have to be estimated using historical data. The incorporation of prediction and estimation risk generally leads to broader loss distributions and therefore to rising values of risk parameters such as Value at Risk or Expected Shortfall. The level of economic capital required may be strongly underestimated if prediction and estimation risk are ignored.
Subjects:probability of default
PD
credit risk
default correlation
asset correlation
point in time
value at risk
estimation risk
JEL:G21
C1
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank

Files in This Item:
File Description SizeFormat
200513dkp_b.pdf670.56 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/19746

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.