A Framework for LGD Validation of Retail Portfolios

Stefan Hlawatsch ()
Additional contact information
Stefan Hlawatsch: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg

No 9025, FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management

Abstract: Modeling and estimating the loss given default (LGD) is necessary for banks which apply for the Internal-Ratings Based Approach for retail portfolios. To validate LGD estimations there are only very few approaches discussed in the literature. In this paper, two models for validating relative LGDs and absolute losses are developed. The validation of relative LGDs is important for risk-adjusted credit pricing and interest rate calculations. The validation of absolute losses is important to meet the capital requirements of Basel II. Both models are tested with real data of a bank. Estimations are tested for robustness with in-sample and out-of-sample tests.

Keywords: Loss Given Default; Validation; Retail Portfolio (search for similar items in EconPapers)
JEL-codes: C52 G21 G28 G32 G38 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2009-08
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.ww.uni-magdeburg.de/fwwdeka/femm/a2009_Dateien/2009_25.pdf First version, 2009 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.ww.uni-magdeburg.de:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mag:wpaper:09025

Access Statistics for this paper

More papers in FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management Contact information at EDIRC.
Bibliographic data for series maintained by Guido Henkel ().