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Blogger Choice – Estimating Probability of Default for Low Default Portfolios April 12, 2007

Posted by riskopedia in Basel II, Model, PD, Retail Risk, Risk Management.
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If you are or have been doing modelling for Basel II, most likely you will come across one or more portfolios with low number of default, probably due to the limited historical modelling dataset in a beign economy environment. (more…)

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Blogger Choice – Research Papers April 12, 2007

Posted by riskopedia in Basel II, EAD, LGD, Model, Of interest, PD, Retail Risk, Risk Management, Stress test, Stress Testing.
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I actually really like this site when there are alot of valuable risk methodology papers. From Pricing, Models, Credit scoring etc.

(more…)

Blogger Choice – Basel II Stress Testing April 1, 2007

Posted by riskopedia in Basel II, EAD, LGD, Model, Of interest, PD, Regulator, Retail Risk, Risk Management, Stress test, Stress Testing.
1 comment so far

A good intro to Basel II Stress testing and has an example being illustrated:

http://www.findarticles.com/p/articles/mi_m0ITW/is_1_86/ai_n14897369

Compliance or Strategic?? March 23, 2007

Posted by riskopedia in Basel II, Model, Of interest, Regulator, Retail Risk, Risk Management, Uncategorized.
2 comments

It is not that far away to the date of Basel II implementation. Most banks would be on their final hurdle, well, at least for Pillar 1.

Up until now, firms who were planned to be beyond standardized, have spent millions. With lot of projects start winding up. One question has floated to the surface, which somehow, did not have a clear answer back then.

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Blogger Choice – Basel Model Behaviour March 20, 2007

Posted by riskopedia in Basel II, EAD, LGD, Model, PD, Regulator, Retail Risk, Risk Management.
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“The Basel II Accord could be the biggest risk management project ever undertaken by Australia’s banks. Stuart Fagg investigates and discovers that better risk modelling is just one part of the jigsaw Basel has nearly come of age. “

http://www.riskmanagementmagazine.com.au/articles/FE/0C0400FE.asp?Type=124&Category=1240

Blogger Choice – Basel II and Australian’s banks March 20, 2007

Posted by riskopedia in Basel II, Of interest, Retail Risk, Risk Management.
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A summary of PWC view on Australian’s banks in Basel II (back in 2005, it will be quite different now, we believed)

www.pwc.com/extweb/industry.nsf/docid/58CDB6C38500D8FE85256760001DE90C/$file/Basel_II.pdf

Constant Proportion Debt Obligation (CPDO) March 17, 2007

Posted by riskopedia in Basel II, Economy, Of interest, Retail Risk, Risk Management.
2 comments

This is a new product when introduced sometime around last year (2006). Here is a presentation by ABN AMRO, cpdo.pdf

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Through the Cycle – PD Scalar March 16, 2007

Posted by riskopedia in Basel II, Economy, PD, Regulator, Retail Risk, Risk Management, scorecard.
6 comments

For Basel modellers, a common problem is a relatively short period of data. In most firms, they might not even able to get up to 5 years worth of data. Hence, the PD models would normally reflecting a Point in time (PIT) estimate or a Short run cycle (SRC) estimate.

Now, its nothing wrong having a PIT estimate. It is really up to the Bank’s senior management to decide if they want:

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NZ OCR has raised 25 basis point to 7.5% March 8, 2007

Posted by riskopedia in Basel II, Economy, LGD, Regulator, Retail Risk.
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The New Zealand Reserve bank has raised the Official Cash rate (OCR), which is used as a tool to control the monetary policy, by 25 basis point to 7.5% this morning. You can refer to http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10427700, as well as http://www.rbnz.govt.nz/news/2007/2960402.html

I am not going to analysis in any more depth or facts whether Alan Bollard should increase the long lasted rate to 7.5%. There are already enough commentators and news out there who will do this job.  

What interested me is the one thing I have picked up from the article:

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Model Validation March 7, 2007

Posted by riskopedia in Basel II, EAD, LGD, Model Validation, PD, Retail Risk.
4 comments

After all these years of Basel II, and all the talks around various methodologies. Finally there is a regconition of Model validation in the press. Sometime this year, there will be a launch of “The Journal of Risk Model Validation”, you can go to this link http://www.journalofriskmodelvalidation.com/ to find out more.

At the moment, most of the financial institutions used external validators such as various consultancy firms (e.g. Experian Scorex, FICO, Moody’s, S&P etc.) and the big 4 (KPMG, EY, PWC, Deloitte). Seemed like they don’t really have a lot of investment in internal validations. Main reason usually the company sees the “internal” thing is costly and not benefit driven. However, I think the institutions under-estimated the “internal” part and over-estimated the “external” part, for the following: (more…)