The single risk factor approach to capital charges in case of correlated loss given default rates

Dirk Tasche

Papers from arXiv.org

Abstract: A new methodology for incorporating LGD correlation effects into the Basel II risk weight functions is introduced. This methodology is based on modelling of LGD and default event with a single loss variable. The resulting formulas for capital charges are numerically compared to the current proposals by the Basel Committee on Banking Supervision. Keywords: Regulatory capital charge, loss given default (LGD).

Date: 2004-02, Revised 2004-02
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