Learn More
Within the past two years, important advances have been made in modeling credit risk at the portfolio level. Practitioners and policy makers have invested in implementing and exploring a variety of new models individually. Less progress has been made, however, with comparative analyses. Direct comparison often is not straightforward, because the di€erent(More)
This paper examines technological progress and its effects in the banking industry. Banks are intensive users of both IT and financial technologies, and have a wealth of data available that may be helpful for the general understanding of the effects of technological change. The research suggests improvements in costs and lending capacity due to improvements(More)
Estimates of average default probabilities for borrowers assigned to each of a ®nancial institution's internal credit risk rating grades are crucial inputs to portfolio credit risk models. Such models are increasingly used in setting ®nancial institution capital structure, in internal control and compensation systems, in asset-backed security design, and(More)
Discussion Papers represent the authors' personal opinions and do not necessarily reflect the views of the Deutsche Bundesbank or its staff. Abstract The credit value-at-risk model underpinning the Basel II Internal Ratings-Based approach assumes that idiosyncratic risk has been diversified away fully in the portfolio, so that economic capital depends only(More)
Although the modern theory of financial intermediation portrays liquidity creation as an essential role of banks, comprehensive measures of bank liquidity creation do not exist. We construct four measures and apply them to data on U.S. banks from 1993-2003. We find that bank liquidity creation increased every year and exceeded $2.8 trillion in 2003. Large(More)
We provide maximum likelihood estimators of term structures of conditional probabilities of bankruptcy over relatively long time horizons , incorporating the dynamics of firm-specific and macroeconomic covariates. We find evidence in the U.S. industrial machinery and instruments sector, based on over 28,000 firm-quarters of data spanning 1971 to 2001, of(More)
1 The opinions expressed here are those of the authors, and do not reflect the views of the Board of Governors or its staff. Abstract When models of portfolio credit risk are calibrated to historical ratings performance data, parameters that capture cross-obligor dependence can be (and often are) fit directly to estimated default correlations. The accuracy(More)