Publication detail

Modeling a distribution of mortgage credit losses

Author(s): PhDr. Petr Gapko Ph.D.,
RNDr. Martin Šmíd Ph.D.,
Type: Article in collection
Year: 2010
Number: 0
ISSN / ISBN: 978-80-7394-218-2
Published in: Proceedings of the 28th International Conference on Mathematical Methods is Economics 2010
Publishing place: České Budějovice
Keywords: Credit Risk, Mortgage, Delinquency Rate, Generalizes Hyperbolic Distribution, Normal Distribution
JEL codes: G21
Suggested Citation:
Grants: 402/09/0965: New Approaches for monitoring and prediction of capital markets 402/09/H045 - Nelineární dynamika v peněžní ekonomii a financích. Teorie a empirické modely GAUK 46108: New Nonlinear Capital Markets Theories: Fractal, Bifurcational and Behavioral Approach
Abstract: One of the biggest risks arising from financial operations is the risk of counterparty default, commonly known as a “credit risk”. Leaving unmanaged, the credit risk would, with a high probability, result in a crash of a bank. In our paper, we will focus on the credit risk quantification methodology. Generalizing the well known KMV model, standing behind Basel II, we build a model of a loan portfolio involving a dynamics of the common factor, influencing the borrowers’ assets, which we allow to be non-normal. We show how the parameters of our model may be estimated by means of past mortgage deliquency rates. We give a statistical evidence that the non-normal model is much more suitable than the one assuming the normal distribution of the risk factors.
Downloadable: Download Paper (PDF)

Partners

Deloitte

Sponsors

CRIF
McKinsey
Patria Finance