Measuring Credit Risk of a Bank's Corporate Loan Portfolio Using Advanced Internal Ratings Base Approach

Abstract

The use of technical and advanced approaches in the measurement of credit risk of banks' portfolios has nowadays become a very hot issue. The most recent technical report issued by the Basel Committee in May 2003 has concentrated heavily on the measurement of credit risk using either foundation or advanced Internal Ratings Base (IRB) approaches. This empirical research study attempts to measure credit risk of a bank's corporate loan portfolio, including firms from 10 different Turkish sectors. The monthly observations of the total amount of corporate loans and the total amount of corporate loans at default across various sectors are downloaded from the web page of Central Bank of Turkey (CBT) in a period of 1999-2002. This period covers 47 monthly observations since CBT has captured sectoral corporate loans beginning of 1999. Therefore, the observed sectoral default rates are needed to be simulated to obtain a nicely shaped distribution. Monte Carlo simulation is applied for 1,000 times. Based on the simulated default rates, the expected sectoral default rates are computed. Next, a credit quality rating scale is fitted into sectoral default rates distributions. Finally, the sectoral weights in the whole loan portfolio are multiplied by the expected sectoral default rates matrix, considering cross-sectoral correlations to get the total amount of the bank's credit risk and capital requirement. It is assumed that sectoral monthly default rates are a good representative of the default risk of a sample bank's corporate loan portfolio since no publicly available data on any particular bank's corporate loan portfolio composition exists. Nevertheless, this research may be a good application for measuring the credit risk of banks' corporate loan portfolios using advanced IRB approach.     

Book‐to‐Market Equity,Asset Correlations and the Basel Capital Requirement

This paper examines the effect of book‐to‐market equity (BE/ME) on asset correlations under the Basel capital requirement. We find that BE/ME captures variations in asset correlations after controlling for firm size, default probability and industry effects from 1987 to 2011. Obligors with higher BE/ME exhibit lower asset correlations compared to those with lower BE/ME. Decomposing BE/ME into assets‐in‐place and growth options based on the asset pricing literature shows that obligors with more assets‐in‐place or more fixed assets have higher BE/ME and lower asset correlations than those with more growth options. Overall, our findings suggest that BE/ME is an additional important factor that may improve the estimates of asset correlations and thereby banks’ capital adequacy.     

Signs of dependence and heavy tails in non-life insurance data

In this paper, we study data from the yearly reports the four major Swedish non-life insurers have sent to the Swedish Financial Supervisory Authority (FSA). We aim at finding marginal distributions of, and dependence between, losses on the five largest lines of business (LoBs) in order to create models for solvency capital requirement (SCR) calculation. We try to use data in an optimal way by sensibly defining an accounting year loss in terms of actuarial liability predictions and by pooling observations from several companies when possible to decrease the uncertainty about the underlying distributions and their parameters. We find that dependence between LoBs is weaker in our data than what is assumed in the Solvency II standard formula. We also find dependence between companies that may affect financial stability and must be taken into account when estimating loss distribution parameters. Moreover, we discuss under what circumstances an insurer is better (or worse) off using an internal model for SCR calculation, instead of the standard formula.     

中美实证会计研究的发展比较

实证会计研究起源于美国,在当今中国会计界,实证会计研究已引起越来越多的注意,本文描述了中美实证会计研究的发展比较。     

A scenario analysis of energy requirements and energy intensity for China's rapidly developing society in the year 2020

Both energy requirements and energy intensity are crucial to the development of a society. This article uses an input–output model to assess how social and economic changes will affect energy requirements and energy intensity for China's rapidly developing society. According to the proposed input–output model, six scenarios were sequentially developed by introducing major impact factors, such as technological advancement, population, income, and urbanization, in order to project China's energy requirements. Based on 1997 data, the impact of economic and social changes on China's energy requirements in 2010 and 2020 were quantitatively analyzed. The results show that technological advancement has the strongest impact on energy intensity. Based on these findings, some related conclusions and corresponding policy recommendations are proposed.     

The Research and Application of the Multi-regression Technique in the Course of Enterprises＇ Marketing Decision-making

The reformation of the economy system has led the functional departments and status of the enterprises into the variance state. Under the condition of the market economy, the kernel of the enterprises＇ functional department has diverted to that of marketing decision-making, which faces to market and meets with the need of consumption. Assuredly, the kernel of marketing decision-making is to prognosticate the future market requirement quantity of the production of enterprises accurately, so that it can ensure and realize the maximum of the enterprises＇ profit to increase. Applying the proof to test demonstration analytical method of economics and adopting the multi-regression technique, this paper analyzes the enterprises＇ production requirement quantity decision-making of the GMC （Global Management Challenge） and changes a great many of uncontrollable factors to the controllable ones of the enterprises. So, it can make the forecast order form closer to the actual prices of the future market requirement quantity in the production marketing decision-making of the enterprises and realize the optimizing combination and the working object with the minimum of the cost and the maximum of the profit. And it can insure the realization of the profit increase of the enterorises mostly in the life-cvcle of the production.     

西部大开发的几个重要问题

面对新时期、新形势下西部大开发的新特征、新问题和新要求,我们要对西部开发这五年来的总体情况正确判断,在今后的西部开发中要有新思路,新机制,新方法.一是要树立和坚持科学的发展观.二是要支持西部的农业.三是要扬弃工业化的推进模式.四是要扬弃我们传统的矿业等自然资源的分配模式.     

试论学生的学习兴趣和需求

兴趣和需求是人们行为的两大动力。应注重学生创造思维、学习兴趣和需求能力的培养,依据层次教育方案,确立确定培养目标,调动和激发学生的学习兴趣,培养其成为社会需要的人才。尊重他们的兴趣,给他们一个充满快乐的学习时光。     

顾客驱动型质量管理模式研究

文章介绍了一种新型的质量管理模式——顾客驱动型质量管理模式,阐述了顾客驱动型质量管理模式的基本思路,分析了顾客驱动型质量管理模式各部分的功能,描述了顾客驱动型质量管理模式的运作流程。     

产品生命周期对配送网络设计的影响

为了在当今竞争激烈的市场环境中持续保有较大竞争优势,供应链中企业的配送网络设计必须考虑产品特征与顾客需求的关系.当产品经历整个生命周期不同阶段时,其市场需求的变化往往具有较大不确定性,因此,企业的配送网络必须动态地与产品需求特征进行匹配,才能具有最大的竞争力.本文讨论了配送网络的不同选择以及这些配送网络适合的产品类型,分析了在产品生命周期的不同阶段,如何设计合适的配送网络.最后,以制药业为例来具体分析产品生命周期不同阶段对配送网络设计的影响.