A Two-Factor Model for PD and LGD Correlation

IF 2.2 3区经济学 Q2 BUSINESS, FINANCE

European Journal of Finance Pub Date : 2011-02-07 DOI:10.2139/ssrn.1476305

J. Witzany

引用次数: 21

Abstract

The paper proposes a two systematic factor model to capture a retail portfolio probability of default (PD) and loss given default (LGD) parameters, in particular their mutual correlation. We argue that the standard one factor models standing behind the Basel II formula and used by a number of studies cannot capture well the correlation between PD and LGD on a large (asymptotic) portfolio. The proposed model is implemented on real banking data giving an estimate of a positive PD and LGD correlation implied by the model slightly above 10%.

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PD与LGD相关的双因素模型

本文提出了一个双系统因子模型来描述零售投资组合的违约概率(PD)和给定违约损失(LGD)参数，特别是它们之间的相互关系。我们认为，巴塞尔II公式背后的标准单因素模型并被许多研究使用，不能很好地捕捉到大(渐近)投资组合上PD和LGD之间的相关性。所提出的模型是在真实银行数据上实现的，给出了模型所隐含的PD和LGD正相关性的估计略高于10%。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

European Journal of Finance BUSINESS, FINANCE-

CiteScore

5.40

自引率

8.00%

发文量

期刊介绍： The European Journal of Finance publishes a full range of research into theoretical and empirical topics in finance. The emphasis is on issues that reflect European interests and concerns. The journal aims to publish work that is motivated by significant issues in the theory or practice of finance. The journal promotes communication between finance academics and practitioners by providing a vehicle for the publication of research into European issues, stimulating research in finance within Europe, encouraging the international exchange of ideas, theories and the practical application of methodologies and playing a positive role in the development of the infrastructure for finance research.