Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/27867
Authors: 
Vetter, Michael
Cremers, Heinz
Year of Publication: 
2008
Series/Report no.: 
Working paper series // Frankfurt School of Finance & Management 102
Abstract: 
In 2004 the Basel Committee published an extensive revision of the capital charges which creates more risk sensitive capital requirements for banks. The New Accord called International Convergence of Capital Measurement and Capital Standard provides in its first pillar for a finer measurement of credit risk. Banks that have received supervisory approval to use the Internal Ratings-Based (IRB) approach may rely on their own internal estimates of risk components in determining the capital requirement for a given exposure. The IRB approach is based on measures of unexpected losses (UL) and expected losses (EL). The risk-weight functions produce capital requirements for the UL portion are based on a onefactor (Merton) model which relies furthermore on the assumption of an infinite fine-grained credit portfolio (also known as Vasicek-Model). As Moody´s stated in 2000: Empirical tests verified the log normal distribution for granular pools. we compared both models in order to benchmark the IRB approach with an existing and in practice already verified model which obviously uses similar assumptions. We, therefore, compute the capital requirement or Credit Value at Risk for given portfolios in both approaches respectively and contrast the results.
Subjects: 
Basel II
Expected Loss
Unexpected Loss
Kreditrisikomodell
logarithmische Normalverteiling
Credit Value at Risk
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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