Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/55229 
Year of Publication: 
2005
Series/Report no.: 
Working Paper Series No. FW15V2
Publisher: 
Technische Universität Braunschweig, Institut für Finanzwirtschaft, Braunschweig
Abstract: 
According to the new capital adequacy framework (Basel II) finally adopted by the Basel Committee in June 2004 the eligibility of collaterals, especially financial collaterals, is extended in comparison to the existing rules. However, financial assets are valued conservatively in the credit context which suggests a strong correlation between collaterals and credit default rates. This paper discusses the impact of the dependency of financial collaterals and default rates on credit risk. Therefore, a general calculation framework for the loss rate of collateralized loans is given and an analytical solution for the valuation of financial collaterals is presented. Finally, the model is applied on empirical data of German insolvencies and German capital markets.
Subjects: 
Basel II
Capital Adequacy Requirements
Value at Risk
Loss Given Default
Probability of Default
Collateral
Collateral Valuation
JEL: 
G21
G28
Document Type: 
Working Paper

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