An attempt to derive the Risk Weight Function for the bank

Van Phuong Nguyen

MPRA Paper from University Library of Munich, Germany

Abstract: According to the Basel Accord II, one of the key factors in the Internal-Ratings Based (IRB) framework is the Risk Weight Function (RWF). Indeed, it uses four risk components including PD, LGD, EAD, and M as input to yield the capital requirement and thereby Risk-Weighted Asset (RWA). Given the extremely important role of the Risk Weight Function, in this project, we aim to derive it mathematically.

Keywords: Basel Accord II; Homogenous Loan Portfolio; Loss Distribution; Expected Loss; Unexpected Loss; Capital Requirement; Risk-Weight Functions. (search for similar items in EconPapers)
JEL-codes: G00 G10 G11 G21 (search for similar items in EconPapers)
Date: 2019-12-01
New Economics Papers: this item is included in nep-rmg and nep-upt
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Citations: View citations in EconPapers (1)

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