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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…)

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

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:

(more…)

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…)