Credit Losses in Economic Downturns - Empirical Evidence for Hong Kong Mortgage Loans

Daniel Rosch and Harald Scheule
Additional contact information
Daniel Rosch: Leibniz University of Hannover

No 152008, Working Papers from Hong Kong Institute for Monetary Research

Abstract: Recent studies find a positive correlation between default and loss given default rates of credit portfolios. In response, financial regulators require financial institutions to base their capital on the 'Downturn' loss rate given default which is also known as Downturn LGD. This article proposes a concept for the Downturn LGD which incorporates econometric properties of credit risk as well as the information content of default and loss given default models. The concept is compared to an alternative proposal by the Department of the Treasury, the Federal Reserve System and the Federal Insurance Corporation. An empirical analysis is provided for Hong Kong mortgage loan portfolios.

Keywords: Basel II; Business Cycle; Capital Adequacy; Correlation; Credit Risk; Economic Downturn; Expected Loss; Fixed Income; Loss Given Default; Probability of Default; Value-at-Risk (search for similar items in EconPapers)
JEL-codes: C51 G20 G28 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2008-08
New Economics Papers: this item is included in nep-ban, nep-rmg and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.hkimr.org/uploads/publication/158/ub_full_0_2_184_hkimr-no-15_bw.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.hkimr.org/uploads/publication/158/ub_full_0_2_184_hkimr-no-15_bw.pdf [301 Moved Permanently]--> http://www.aof.org.hk/research/HKIMR/uploads/publication/158/ub_full_0_2_184_hkimr-no-15_bw.pdf [301 Moved Permanently]--> https://www.aof.org.hk/research/HKIMR/uploads/publication/158/ub_full_0_2_184_hkimr-no-15_bw.pdf)

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:hkm:wpaper:152008

Access Statistics for this paper

More papers in Working Papers from Hong Kong Institute for Monetary Research Contact information at EDIRC.
Bibliographic data for series maintained by HKIMR ().