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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.

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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.
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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

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

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.
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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…)

APRA 20% LGD floor Cont… March 7, 2007

Posted by riskopedia in Basel II, LGD, Retail Risk.
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There is another article I have found
http://www.apra.gov.au/RePEc/RePEcDocs/Archive/discussion_papers/dp0014.pdf

Again, similar para. on P.8 “Loss-given-default Loss-given-default (LGD) in the proposed MER model is based on the long-run average LGD of 20 per cent reported by LMIs, across all LVR buckets, from 1980 to 2000. Consistent with economic intuition, the proposed model allows LGD to vary with LVR. This increases the model’s sensitivity to risk compared with the current model, which has a flat LGD across all LVR buckets.”

Regardless of what results we have in MER model, I have couple of comments: (more…)

APRA 20% LGD floor March 6, 2007

Posted by riskopedia in Basel II, LGD, Retail Risk.
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Been reading an interesting article in Ozrisk blog
“APRA increases the cost of home loans – again”. With those risk people in the Aussie/Nz area, this shoudn’t come as a surprise when most banks are still finalising the model methodologies and outcomes.

Here is my gut feel of how APRA came to 20%: (more…)