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Title: Analysis of PD-LGD correlation effects on the minimum capital requirement
Author: Pérez Torre, Víctor
Director/Tutor: Guillén, Montserrat
Keywords: Risc de crèdit
Correlació (Estadística)
Estats financers
Treballs de fi de màster
Credit risk
Correlation (Statistics)
Financial statements
Master's theses
Issue Date: 2018
Abstract: The minimum capital requirement in the Basel II IRB approach implicitly assumes that the risk factors involved in PD and LGD are independent. This thesis analyses and quantifies the effects on the minimum capital requirement under the presence of correlation between the factors affecting PD and LGD. The same portfolio is simulated with different PD-LGD correlation and the minimum capital requirement in the IRB approach is computed with two different sets of risk factors: the real an correlated PD and LGD and the PD and LGD that will be estimated with the usual modeling approach. The main conclusions is that as the dependency between PD and LGD grows, the minimum capital is more underestimated.
Note: Treballs Finals del Màster de Ciències Actuarials i Financeres, Facultat d'Economia i Empresa, Universitat de Barcelona, Curs: 2017-2018, Tutor: Montserrat Guillen Estany
Appears in Collections:Màster Oficial - Ciències Actuarials i Financeres (CAF)

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