Credit Risk Measurement for Purposes of Regulatory Capital Requirement and Economic Capital Calculation
|Author:||Mgr. Magda Neprašová, PhD.|
|Year:||2003 - summer|
|Leaders:|| † Dr. Zdenek Sid Blaha M.A., D.B.A.
|Work type:|| Dissertations
|Awards and prizes:|
|Abstract:||The dissertation "Credit Risk Measurement for Purposes of Regulatory Capital Requirement and Economic Capital Calculation" is generally aimed at application of the proposed New Basle Capital Accord on one side and on application of some credit risk models on the other. The dissertation concentrates especially on quantification of regulatory capital requirement and economic capital resulting from a hypothetical portfolio consisting of over 70 Czech companies over a period of 7 years (1995 -- 2001).
First part of the dissertation describes different approaches to credit risk measurement. Starting with rather traditional concepts the dissertation continues with description of credit risk models based on option theory (KMV model), models based on "Value at risk" methodologies (e.g. CreditMetrics) and models based on credit spreads (e.g. KPMG´s LAS model).
The theoretical part also discusses the concept of capital adequacy, resp. regulatory capital requirement, and highlights the main points of the proposed New Basle Capital Accord of 2001.
Main part of the dissertation is devoted to analysis of the portfolio of the Czech companies and to application of different approaches to this portfolio. Following approaches are applied: the Basle Capital Accord of 1988, the proposal of the New Basle Capital Accord of 2001, the CreditMetrics, default-mode model based on "Value at risk" and Credit spread model (KPMG´s model), where the main objective of all approaches is to quantify credit risk arising from the hypothetical portfolio (in terms of regulatory capital requirement, resp. economic capital in case of models). In addition, specific Czech problems related to estimation of different parameters used in models are discussed in the disertation and represent a very important part of the thesis.
The final part of the disertation compares the results arising from different approaches and evaluates the applicability of different approaches in the Czech Republic.
The credit risk models and the proposal of the New Basle Capital Accord potentially represent a novel view on credit risk measurement on the first sight, but the conclusions of the analysis is rather encouraging. Individual approaches discussed do provide consistent results and allow us to formulate a hypothesis that the New Basle Capital Accord is to an extent compliant with the concept of economic capital and that all applied concept may in a certain way represent rational basis for credit risk measurement in the economic environment of the Czech Republic.
|Downloadable:|| Dissertation Thesis - Neprašová