Work

Statistical models for the Basel II internal ratings-based approach to measuring credit risk of retail products

Year: 2008

Type: article

Abstract: The Basel II Accord is a financial risk management standard recently adopted by many financial institutions and regulators around the world.The general spirit of the accord is to develop a systematic approach to evaluating and controlling risks based on timely data and their analysis and interpretation.The interface between statistical modeling and the financial application is of pivotal importance in the development of the internal ratings-based (IRB) approach recommended by the Basel II Accord.This article reviews the IRB requirements and develops new empirical Bayes models for modeling probability of default and loss given default, which are the key ingredients in the IRB approach to credit risk analysis of retail exposures.

Source: Statistics and Its Interface

DOI: 10.4310/sii.2008.v1.n2.a2

Authors: Tze Leung Lai, Samuel Po-Shing Wong

Institutions: Stanford University, Chinese University of Hong Kong

Language: English

Topic: Credit Risk and Financial Regulations

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: bronze

Funder: National Science Foundation

Award: Detection, Estimation and Optimization Problems in Stochastic Systems, and Applications to Genetics, Engineering and Economics