Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/37041
Authors: 
Ebert, Sebastian
Lütkebohmert, Eva
Year of Publication: 
2009
Series/Report no.: 
Bonn Econ Discussion Papers 24/2009
Abstract: 
In 2005 the Internal Ratings Based (IRB) approach of `Basel II' was enhanced by a `treatment of double default effects' to account for credit risk mitigation techniques such as ordinary guarantees or credit derivatives. This paper reveals several severe problems of this approach and presents a new method to account for double default effects. This new it asset drop technique can be applied within any structural model of portfolio credit risk. When formulated within the IRB approach of Basel II, it is very well suited for practical application as it does not pose extensive data requirements and economic capital can still be computed
Subjects: 
Basel II
double default
IRB approach
regulatory capital
structural credit portfolio models
JEL: 
G31
G28
Document Type: 
Working Paper
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