A framework for loss given default validation of retail portfolios

Stefan Hlawatsch and Peter Reichling

Journal of Risk Model Validation

Abstract: ABSTRACT Modeling and estimating loss given default (LGD) is necessary for banks that apply for the internal ratings based approach for retail portfolios. To validate LGD estimations, there are only a few approaches discussed in the literature. In this paper, two models for validating relative LGD and absolute losses are developed. The validation of relative LGD is important for risk-adjusted credit pricing and interest rate calculations. The validation of absolute losses is important to meet the capital requirements of Basel II. Both models are tested with real data from a bank. Estimations are tested for robustness with in-sample and out-of-sample tests.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-risk-model-validat ... of-retail-portfolios (text/html)

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:rsk:journ5:2161283

Access Statistics for this article

More articles in Journal of Risk Model Validation from Journal of Risk Model Validation
Bibliographic data for series maintained by Thomas Paine ().