Prof. Dr. Eva Lütkebohmert-Holtz
Improved Modeling of Double Default Effects in Basel II - An Endogeneous Asset Drop Model without Additional Correlation
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| Wann |
22.01.2010 von 11:15 bis 13:00 |
| Name | Kristin Ohneberg |
| Kontakttelefon | 0761-203-7701 |
| Termin übernehmen |
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In 2005 the Internal Ratings Based (IRB) approach of 'Basel II' was enhanced by a 'treatment of double default effects' to account for credit risk mitigation techniques such as ordinary guarantees or credit derivatives. This paper reveals several severe problems of this approach and presents a new method to account for double default effects. This new asset drop technique can be applied within any structural model of
portfolio credit risk. When formulated within the IRB approach of Basel II, it is very well suited for practical application as it does not pose extensive data requirements and economic capital can still be computed analytically.