Sample dependency during unconditional credit capital estimation

Alex Ferrer (), José Casals and Sonia Sotoca

Finance Research Letters, 2015, vol. 15, issue C, 175-186

Abstract: The unconditional credit loss distribution is identified based on a long-term sample. This sample influences the capital estimate. In this study, we performed an empirical investigation of this sample dependency problem using charge-off data and by focusing on the influence of the Great Recession. The results demonstrated the significant dependency of the capital requirements on the homogeneity and cyclicality of the long-term sample. Thus, a sample containing only the Great Recession data produced lower capital requirements due to the homogeneity effect, whereas a mixed sample containing the Great Recession data produced higher capital requirements due to the cyclical effect.

Keywords: Charge-off; Credit risk; Unconditional capital; Unconditional credit loss distribution (search for similar items in EconPapers)
JEL-codes: C58 G21 G32 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:15:y:2015:i:c:p:175-186

DOI: 10.1016/j.frl.2015.09.008

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