Least Impulse Response Estimator for Stress Test Exercises

Christian Gourieroux and Yang Lu
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Christian Gourieroux: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique

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Abstract: We introduce new semi-parametric models for the analysis of rates and proportions, such as proportions of default, (expected) loss-given-default and credit conversion factor encountered in credit risk analysis. These models are especially convenient for the stress test exercises demanded in the current prudential regulation. We show that the Least Impulse Response Estimator, which minimizes the estimated effect of a stress, leads to consistent parameter estimates. The new models with their associated estimation method are compared with the other approaches currently proposed in the literature such as the beta and logistic regressions. The approach is illustrated by both simulation experiments and the case study of a retail P2P lending portfolio.

Keywords: Basel Regulation; Stress Test; (Expected) Loss-Given-Default; Impulse Response; Credit Scoring; Pseudo-Maximum Likelihood; LIR Estimation; Beta Regression; Moebius Transformation (search for similar items in EconPapers)
Date: 2019-04-04
New Economics Papers: this item is included in nep-ban and nep-rmg
Note: View the original document on HAL open archive server: https://hal.science/hal-02089698v1
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Least impulse response estimator for stress test exercises (2019)
Working Paper: Least Impulse Response Estimator for Stress Test Exercises (2019)
Working Paper: Least Impulse Response Estimator for Stress Test Exercises (2019)
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