Capital for concentrated credit portfolios

Arbeitspapier

Most credit portfolios contain obligor concentration risk and yet international bank regulatory capital rules and many industry models assume perfect diversification. Multiple methods are available to calculate the approximate capital needs of a concentrated credit portfolio, but many of these involve advanced mathematical arguments, substantial computation time, and fail to clearly identify the most important credits causing concentration risk. In this article, I illustrate three approaches for calculating loss distributions and value-at-risk capital requirements. Of these, the large exposure approach proposed by Kupiec (2015) is especially easy to implement. It produces accurate estimates of the economic capital required for a concentrated portfolio and immediately identifies the obligors most responsible for generating concentration risk.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: AEI Economics Working Paper ; No. 2015-06

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: capital requirements ; Basel Comittee on Banking Supervision

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kupiec, Paul H.
• Ereignis: Veröffentlichung
• (wer): American Enterprise Institute (AEI)
• (wo): Washington, DC
• (wann): 2015

Weitere Informationen

• Handle: http://hdl.handle.net/10419/280526
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ