Macroeconomic Dynamics and Credit Risk: A Global Perspective

Til Schuermann (), Bjoern-Jakob Treutler (), Scott M. Weiner () and M Hashem Pesaran ()

No CESifo Working Paper No. 995, CESifo Working Paper Series from CESifo Group Munich

Abstract: We develop a framework for modeling conditional loss distributions through the introduction of risk factor dynamics. Asset value changes of a credit portfolio are linked to a dynamic global macroeconometric model, allowing macro effects to be isolated from idiosyncratic shocks. Default probabilities are driven primarily by how firms are tied to business cycles, both domestic and foreign, and how business cycles are linked across countries. The model is able to control for firm-specific heterogeneity as well as generate multi-period forecasts of the entire loss distribution, conditional on specific macroeconomic scenarios.

Keywords: risk management; economic interlinkages; loss forecasting; default correlation (search for similar items in EconPapers)
JEL-codes: C32 E17 G20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc and nep-fin
Date: 2003
View list of references View citations in EconPapers

Downloads: (external link)
http://www.cesifo-group.de/DocCIDL/cesifo_wp995.pdf (application/pdf)

Related works:
Working Paper: Macroeconomic Dynamics and Credit Risk: A Global Perspective (2003)
Working Paper: Macroeconomic Dynamics and Credit Risk: A Global Perspective
Journal Article: Macroeconomic Dynamics and Credit Risk: A Global Perspective (2006)
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: http://EconPapers.repec.org/RePEc:ces:ceswps:_995

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich
Address: Poschingerstrasse 5, 81679 Munich
Series data maintained by Julio Saavedra ().