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dc.contributor.authorDüllmann, Klausen_US
dc.contributor.authorScheicher, Martinen_US
dc.contributor.authorSchmieder, Christianen_US
dc.coverage.temporal1996-2004en_US
dc.date.accessioned2009-01-28T16:05:38Z-
dc.date.available2009-01-28T16:05:38Z-
dc.date.issued2007en_US
dc.identifier.urihttp://hdl.handle.net/10419/19772-
dc.description.abstractIn credit risk modelling, the correlation of unobservable asset returns is a crucial component for the measurement of portfolio risk. In this paper, we estimate asset correlations from monthly time series of Moody's KMV asset values for around 2,000 European firms from 1996 to 2004. We compare correlation and value-atrisk (VaR) estimates in a one-factor or market model and a multi-factor or sector model. Our main finding is a complex interaction of credit risk correlations and default probabilities affecting total credit portfolio risk. Differentiation between industry sectors when using the sector model instead of the market model has only a secondary effect on credit portfolio risk, at least for the underlying credit portfolio. Averaging firm-dependent asset correlations on a sector level can, however, cause a substantial underestimation of the VaR in a portfolio with heterogeneous borrower size. This result holds for the market as well as the sector model. Furthermore, the VaR of the IRB model is more stable over time than the VaR of the market model and the sector model, while its distance from the other two models fluctuates over time.en_US
dc.language.isoengen_US
dc.relation.ispartofseriesDiscussion Paper, Series 2: Banking and Financial Supervision 2007,13en_US
dc.subject.jelC15en_US
dc.subject.jelG21en_US
dc.subject.ddc330en_US
dc.subject.keywordAsset correlationsen_US
dc.subject.keywordsector concentrationen_US
dc.subject.keywordcredit portfolio risken_US
dc.subject.stwKreditrisikoen_US
dc.subject.stwValue at Risken_US
dc.subject.stwPortfolio-Managementen_US
dc.subject.stwBuchwerten_US
dc.subject.stwKorrelationen_US
dc.subject.stwEuropaen_US
dc.titleAsset correlations and credit portfolio risk: an empirical analysisen_US
dc.typeWorking Paperen_US
dc.identifier.ppn54627062Xen_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
dc.identifier.repecRePEc:zbw:bubdp2:6352-
Appears in Collections:Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank

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