Journal of Risk Model Validation
ISSN:
1753-9579 (print)
1753-9587 (online)
Editor-in-chief: Steve Satchell
Loss given default modeling: an application to data from a Polish bank
Marek Karwański, Michał Gostkowski and Piotr Jałowiecki
Need to know
- We presented the outline of the Analytical Base Table for LGD calculations.
- We have concluded that the multilogit model is better for LGD estimates than beta-reg.
- We proposed the Monte-Carlo all-subset selection method to reduce generic LGD model.
Abstract
ABSTRACT
Basel II allows banks to determine capital requirements using an internal ratings-based (IRB) approach. Under the IRB approach, one of the key parameters in the regulatory capital formula is loss given default (LGD). This paper compares two methods of estimating LGD: a beta regression model and a multinomial logit (MNL) model. The calculations were conducted for overdrafts of small and medium enterprises using data provided by a Polish bank. The results indicate that the MNL model is better for modeling LGD than the beta regression model.
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Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
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