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
26 October 2021
Z-score vs minimum variance preselection methods for constructing small portfolios
Several contributions in the literature argue that a significant in-sample risk reduction can be obtained by investing in a relatively [...]
The Credit Cycle Outlook
The good times are gone. As public markets wrestle with a perfect storm of macroeconomic risks and difficult national and [...]
26 October 2021
Wiserfunding Co-Founder Dr. Edward Altman at the European Parliament
Dr. Edward Altman at the European Parliament explaining the need for an independent market standard to assess SME Credit Risk [...]
