 Calibrating exposure at default for corporate credit linesGabriel Jimenez, Jose Lopez and Jesús Saurina Journal of Risk Management in Financial Institutions, 2009, vol. 2, issue 2, 121-129 Abstract: The management of credit risk inherent in a corporate credit line is similar to that of a term loan, but with one key difference. In addition to needing to know the borrower's probability of default and the facility's loss given default, the bank must also have a measure of the line's exposure at default (EAD). In fact, EAD is one of the key parameters used for regulatory capital calculations within the Basel II framework. This paper constructs and examines EAD values for credit lines within the Spanish credit register, which provides a census of all corporate lending within Spain over the last 20 years. The analysis shows that defaulting firms have significantly higher credit line usage rates and EAD values up to five years prior to their actual default. Furthermore, the analysis indicates that there are important variations in EAD values due to credit line size, collateralisation and maturity. While the results are derived from data for a single country, they should provide useful benchmarks for further academic, business and policy research into this under-developed area of credit risk management. Keywords: exposure at default; EAD; loss equivalent amount; LEQ; credit lines; Basel II (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2009:v:2:i:2:p:121-129 Access Statistics for this article More articles in Journal of Risk Management in Financial Institutions from Henry Stewart Publications |
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