Least Impulse Response Estimator for Stress Test Exercises

Least impulse response estimator for stress test exercises

Christian Gouriéroux and Yang Lu
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Christian Gouriéroux: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique

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Abstract: We introduce new semi-parametric models for the analysis of rates and proportions, such as proportions of default, (expected) loss-given-default and credit conversion factor encountered in credit risk analysis. These models are especially convenient for the stress test exercises demanded in the current prudential regulation. We show that the Least Impulse Response Estimator, which minimizes the estimated effect of a stress, leads to consistent parameter estimates. The new models with their associated estimation method are compared with the other approaches currently proposed in the literature such as the beta and logistic regressions. The approach is illustrated by both simulation experiments and the case study of a retail P2P lending portfolio.

Date: 2019
New Economics Papers: this item is included in nep-rmg
Note: View the original document on HAL open archive server: https://hal.science/hal-02419030v1
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Published in Journal of Banking and Finance, 2019, 103, pp.62-77. ⟨10.1016/j.jbankfin.2019.03.021⟩

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Related works:
Journal Article: Least impulse response estimator for stress test exercises (2019)
Working Paper: Least Impulse Response Estimator for Stress Test Exercises (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02419030

DOI: 10.1016/j.jbankfin.2019.03.021

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