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The Basel II Risk Parameters

Estimation, Validation, and Stress Testing

  • Book
  • © 2006

Overview

Editors:
  1. Bernd Engelmann

    1. Quanteam Dr. Bernd Engelmann und Sören Gerlach GbR, Frankfurt

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    You can also search for this editor in PubMed   Google Scholar

  2. Robert Rauhmeier

    1. Risk Instruments — Methods, Dresdner Bank AG, Frankfurt

    View editor publications

    You can also search for this editor in PubMed   Google Scholar

  • Insights into credit portfolio models and the Basel II framework
  • Diverse perspectives through articles from supervisors, researchers and practitioners

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Table of contents (15 chapters)

  1. Front Matter

    Pages i-xv
    Download chapter PDF

  2. Statistical Methods to Develop Rating Models

    • Evelyn Hayden, Daniel Porath
    Pages 1-12

  3. Estimation of a Rating Model for Corporate Exposures

    • Evelyn Hayden
    Pages 13-24

  4. Scoring Models for Retail Exposures

    • Daniel Porath
    Pages 25-37

  5. The Shadow Rating Approach — Experience from Banking Practice

    • Ulrich Erlenmaier
    Pages 39-77

  6. Estimating Probabilities of Default for Low Default Portfolios

    • Katja Pluto, Dirk Tasche
    Pages 79-103

  7. A Multi-Factor Approach for Systematic Default and Recovery Risk

    • Daniel Rösch, Harald Scheule
    Pages 105-125

  8. Modelling Loss Given Default: A “Point in Time”-Approach

    • Alfred Hamerle, Michael Knapp, Nicole Wildenauer
    Pages 127-142

  9. Estimating Loss Given Default — Experiences from Banking Practice

    • Christian Peter
    Pages 143-175

  10. Overview of EAD Estimation Concepts

    • Walter Gruber, Ronny Parchert
    Pages 177-196

  11. EAD Estimates for Facilities with Explicit Limits

    • Gregorio Moral
    Pages 197-242

  12. Validation of Banks’ Internal Rating Systems - A Supervisory Perspective

    • Stefan Blochwitz, Stefan Hohl
    Pages 243-262

  13. Measures of a Rating’s Discriminative Power — Applications and Limitations

    • Bernd Engelmann
    Pages 263-287

  14. Statistical Approaches to PD Validation

    • Stefan Blochwitz, Marcus R. W. Martin, Carsten S. Wehn
    Pages 289-306

  15. PD-Validation — Experience from Banking Practice

    • Robert Rauhmeier
    Pages 307-346

  16. Development of Stress Tests for Credit Portfolios

    • Volker Matthias Gundlach
    Pages 347-368

  17. Back Matter

    Pages 369-376
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Keywords

About this book

In the last decade the banking industry has experienced a significant development in the understanding of credit risk. Refined methods were proposed concerning the estimation of key risk parameters like default probabilities. Further, a large v- ume of literature on the pricing and measurement of credit risk in a portfolio c- text has evolved. This development was partly reflected by supervisors when they agreed on the new revised capital adequacy framework, Basel II. Under Basel II, the level of regulatory capital depends on the risk characteristics of each credit while a portfolio context is still neglected. The focus of this book is on the estimation and validation of the three key Basel II risk parameters, probability of default (PD), loss given default (LGD), and ex- sure at default (EAD). Since the new regulatory framework will become operative in January 2007 (at least in Europe), many banks are in the final stages of imp- mentation. Many questions have arisen during the implementation phase and are discussed by practitioners, supervisors, and academics. A ‘best practice’ approach has to be formed and will be refined in the future even beyond 2007. With this book we aim to contribute to this process. Although the book is inspired by the new capital framework, we hope that it is valuable in a broader context. The three risk parameters are central inputs to credit portfolio models or credit pricing al- rithms and their correct estimation is therefore essential for internal bank contr- ling and management.

Reviews

From the reviews:

"This book compiles articles by various authors addressing estimation of three key risk parameters: probability of default (PD), loss given default (LGD), and exposure at default (EAD). … The authors identify their intended audience as risk managers and quantitative risk or ratings analysts working on credit risk and regulatory issues. These groups likely will find this book an accessible reference … . The exposition related to regulatory issues is quite good and worthwhile for all." (Keith Heyen, Journal of the American Statistical Association, Vol. 103 (483), September, 2008)

Editors and Affiliations

  • Quanteam Dr. Bernd Engelmann und Sören Gerlach GbR, Frankfurt

    Bernd Engelmann

  • Risk Instruments — Methods, Dresdner Bank AG, Frankfurt

    Robert Rauhmeier

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