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Systematic credit cycle risk of financial collaterals: modelling and evidence
[working paper]
Corporate Editor
Technische Universität Braunschweig, Department Wirtschaftswissenschaften, Institut für Finanzwirtschaft
Abstract "According to the new capital adequacy framework (Basel II) finally adopted by the Basel Committee in June 2004 the eligibility of collaterals, especially financial collaterals, is extended in comparison to the existing rules. However, financial assets are valued conservatively in the credit context... view more
"According to the new capital adequacy framework (Basel II) finally adopted by the Basel Committee in June 2004 the eligibility of collaterals, especially financial collaterals, is extended in comparison to the existing rules. However, financial assets are valued conservatively in the credit context which suggests a strong correlation between collaterals and credit default rates. This paper discusses the impact of the dependency of financial collaterals and default rates on credit risk. Therefore, a general calculation framework for the loss rate of collateralized loans is given and an analytical solution for the valuation of financial collaterals is presented. Finally, the model is applied on empirical data of German insolvencies and German capital markets." (author's abstract)... view less
Keywords
capital; risk; credit; stock exchange; stock market; research; empirical research; insolvency; equity; security; capital market
Classification
Economic Policy
Document language
English
Publication Year
2005
City
Braunschweig
Page/Pages
58 p.
Series
IF Working Paper Series, FW15V2
Status
reviewed
Licence
Deposit Licence - No Redistribution, No Modifications
Data providerThis metadata entry was indexed by the Special Subject Collection Social Sciences, USB Cologne