The impact of macroeconomic factors on collateral value within the framework of expected credit loss calculation

Yurii Yurchenko

MPRA Paper from University Library of Munich, Germany

Abstract: The study examines the impact of macroeconomic factors on the expected credit losses of a financial instrument related to changes in the value of collateral. The author has developed a method of calculating this impact on the basis of econometric models, as well as simulated the effect on expected credit losses and reserves on a financial instrument. Based on the proposed approach, appropriate models have been constructed based on the data of the US and Ukrainian economies for the maximum period available, taking into account the adequacy of the data. In particular, it has been shown that applying the methodology of adjusting collateral value to macroeconomic factors can lead to a reduction of the reserve according to the requirements of the regulator, i.e. from the financial institution's point of view it is possible to release some of the funds additionally.

Keywords: LGD; Collateral value; OLS; Credit risk; valuation; GLM (search for similar items in EconPapers)
JEL-codes: C22 G21 G32 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-cfn, nep-ore and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:97135

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