Arbeitspapier
Granularity adjustment for Basel II
The credit value-at-risk model underpinning the Basel II Internal Ratings-Based approach assumes that idiosyncratic risk has been diversified away fully in the portfolio, so that economic capital depends only on systematic risk contributions. We develop a simple methodology for approximating the effect of undiversified idiosyncratic risk on VaR. The supervisory review process (Pillar 2) of the new Basel framework offers a potential venue for application of the proposed granularity adjustment (GA). Our GA is a revision and extension of the methodology proposed in the Basel II Second Consultative Paper. The revision incorporates some technical advances as well as modifications to the Basel II rules since the Second Consultative Paper of 2001. Most importantly, we introduce an ?upper bound? methodology under which banks would be required to aggregate multiple exposures to the same underlying obligor only for a subset of their obligors. This addresses what appears to be the most significant operational burden associated with any rigorous assessment of residual idiosyncratic risk in the portfolio. For many banks, this approach would permit dramatic reductions in data requirements relative to the full GA.
- Sprache
-
Englisch
- Erschienen in
-
Series: Discussion Paper Series 2 ; No. 2007,01
- Klassifikation
-
Wirtschaft
Financial Institutions and Services: Government Policy and Regulation
Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- Thema
-
Basel II
granularity adjustment
value-at-risk
idiosyncratic risk
Kreditrisiko
Branche
Portfolio-Management
Messung
Basel II
Deutschland
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Lütkebohmert, Eva
Gordy, Michael B.
- Ereignis
-
Veröffentlichung
- (wer)
-
Deutsche Bundesbank
- (wo)
-
Frankfurt a. M.
- (wann)
-
2007
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Lütkebohmert, Eva
- Gordy, Michael B.
- Deutsche Bundesbank
Entstanden
- 2007
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