This paper analyses the impact of various assumptions about the association between aggregate default probabilities and the loss given default on bank loans and corporate bonds, and seeks to empirically explain this critical relationship. Moreover, it simulates the effects of this relationship on the procyclicality of mandatory capital requirements like those proposed in 2001 by the Basel Committee on Banking Supervision. We present the analysis and results in four distinct sections.
SIMILAR POSTS
12 April 2022
What We’ve Heard and What We’ve Been Building
What We Have Learned All our clients share a common goal; they need accurate, independent, and reliable insights into SMEs’ credit risk. [...]
24 March 2022
Weak business models to blame for the collapse of UK energy providers
This week, we released research into the UK energy sector, which highlighted systemic shortcomings in the assessment of dozens of [...]
17 December 2021
Four Themes and a Notable Absence from Risk Minds 2021
After years of virtual conferences & the looming threat of the omicron variant, we weren't t sure what to expect [...]