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Modeling a distribution of mortgage credit losses
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SYSNO ASEP 0347639 Document Type C - Proceedings Paper (int. conf.) R&D Document Type Conference Paper Title Modeling a distribution of mortgage credit losses Author(s) Gapko, Petr (UTIA-B)
Šmíd, Martin (UTIA-B) RID, ORCIDSource Title Proceedings of the 28th International Conference on Mathematical Methods in Economics 2010. - České Budějovice : University of South Bohemia, 2010 / Houda M. ; Friebelová J. - ISBN 978-80-7394-218-2 Pages s. 150-155 Number of pages 6 s. Action 28-th International Conference on Mathematical Methods in Economics Event date 08.09.2010-10.09.2010 VEvent location České Budějovice Country CZ - Czech Republic Event type EUR Language eng - English Country CZ - Czech Republic Keywords Credit Risk ; Mortgage ; Delinquency Rate ; Generalized Hyperbolic Distribution ; Normal Distribution Subject RIV AH - Economics R&D Projects GD402/09/H045 GA ČR - Czech Science Foundation (CSF) GA402/09/0965 GA ČR - Czech Science Foundation (CSF) CEZ AV0Z10750506 - UTIA-B (2005-2011) Annotation One of the biggest risks arising from financial operations is the risk of counterparty default, commonly known as a “credit risk”. Leaving unmanaged, the credit risk would, with a high probability, result in a crash of a bank. In our paper, we will focus on the credit risk quantification methodology. We will demonstrate that the current regulatory standards for credit risk management are at least not perfect, despite the fact that the regulatory framework for credit risk measurement is more developed than systems for measuring other risks, e.g. market risks or operational risk. Generalizing the well known KMV model, standing behind Basel II, we build a model of a loan portfolio involving a dynamics of the common factor, influencing the borrowers’ assets, which we allow to be non-normal. We show how the parameters of our model may be estimated by means of past mortgage deliquency rates. Workplace Institute of Information Theory and Automation Contact Markéta Votavová, votavova@utia.cas.cz, Tel.: 266 052 201. Year of Publishing 2011
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