Credit risk in the leasing industry |
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| Affiliation: | 1. ALBA Graduate Business School, The American College of Greece, 6-8 Xenias Str, 11528 Athens, Greece;2. Bank of Greece, 21 E. Venizelos Ave., 10250 Athens, Greece;3. University of Piraeus, Department of Banking and Financial Management, 80 Karaoli & Dimitriou str., 18534 Piraeus, Greece;4. Surrey Business School, University of Surrey, Guildford, Surrey, GU2 7XH, United Kingdom;1. University of California, Los Angeles (UCLA) Anderson School of Management, United States;2. National Bureau of Economic Research (NBER), United States;3. Leibniz Institute for Financial Research, Germany;4. London Business School, United Kingdom;5. Centre for Economic Policy Research (CEPR), United Kingdom;1. University of Texas at El Paso, Economics and Finance Department, College of Business Administration, Rm. 247, El Paso, TX 79968-0543, USA;2. New Mexico State University, Finance Department, College of Business, Rm. 317, Las Cruces, NM 88003-8001, USA |
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| Abstract: | This paper is devoted to the credit risk modeling issues of retail lease portfolios. Using a re-sampling method, I estimate the probability density function of losses and VaR measures in a portfolio of 46,732 leases issued between 1990 and 2000 by a major European financial institution. My results show that physical collaterals play a major role in reducing the credit risk associated with lease portfolios. However, because of insufficient recognition of such collaterals under the new regulatory capital framework (Basel II), significant differences are observed between the estimated capital requirements and those calculated in accordance with the various Basel II approaches. |
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