Measuring the Covariance Risk of Consumer Debt Portfolios
Carlos Madeira
No 240, 2019 Meeting Papers from Society for Economic Dynamics
Abstract:
The covariance risk of consumer loans is difficult to measure due to high heterogeneity. Using the Chilean Household Finance Survey I simulate the default conditions of heterogeneous households over distinct macro scenarios. I show that consumer loans have a high covariance beta relative to the stock market and bank assets. Banks' loan portfolios have very different covariance betas, with some banks being prone to high risk during recessions. High income and older households have lower betas and help diversify banks' portfolios. Households' covariance risk increases the probability of being rejected for credit and has a negative impact on loan amounts.
Date: 2019
New Economics Papers: this item is included in nep-ban and nep-rmg
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Related works:
Journal Article: Measuring the covariance risk of consumer debt portfolios (2019)
Working Paper: Measuring the Covariance Risk of Consumer Debt Portfolios (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:240
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