Arbeitspapier
Default estimation, correlated defaults, and expert information
Capital allocation decisions are made on the basis of an assessment of creditworthiness. Default is a rare event for most segments of a bank's portfolio and data information can be minimal. Inference about default rates is essential for efficient capital allocation, for risk management and for compliance with the requirements of the Basel II rules on capital standards for banks. Expert information is crucial in inference about defaults. A Bayesian approach is proposed and illustrated using prior distributions assessed from industry experts. A maximum entropy approach is used to represent expert information. The binomial model, most common in applications, is extended to allow correlated defaults yet remain consistent with Basel II. The application shows that probabilistic information can be elicited from experts and econometric methods can be useful even when data information is sparse.
- Sprache
-
Englisch
- Erschienen in
-
Series: CAE Working Paper ; No. 08-02
- Klassifikation
-
Wirtschaft
- Thema
-
Bayesian inference
Basel II
risk management
prior elicitation
small probability estimation
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Kiefer, Nicholas M.
- Ereignis
-
Veröffentlichung
- (wer)
-
Cornell University, Center for Analytical Economics (CAE)
- (wo)
-
Ithaca, NY
- (wann)
-
2008
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:46 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Kiefer, Nicholas M.
- Cornell University, Center for Analytical Economics (CAE)
Entstanden
- 2008
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