An Intensity Based Non-Parametric Default Model for Residential Mortgage Portfolios PDF Download
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Author: Jürg Burkhard
Publisher:
ISBN:
Category :
Languages : en
Pages : 71
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Book Description
In June 2003 Swiss banks held over CHF 500 billion in mortgages. This important segment accounts for about 63% of all loan portfolios of Swiss banks. Since default insurance is not common in Switzerland, the corresponding risks are a severe threat for the health of the financial system. We focus the analysis on portfolios of residential mortgages and model the probability distribution of the number of defaults using a non-parametric approach, where the intensity processes associated to the time-to-default is linked to a set of predictors through general smooth functions: A generalized additive model is used to condition default intensities of mortgages on relevant economic risk drivers. We calibrate our model on a large mortgage servicing data set and compare the resulting loss distributions to a well-known benchmark, i.e. the loss distribution from CreditRisk+ as commonly applied in the industry. The conditional loss distribution and risk measures for a large mortgage portfolio are shown to be greatly sensitive to the prevailing socio-economic scenario. We present evidence that aggregated res- idential mortgage default risk is not only driven by the rating but also by variables such as the loan-to-value ratio, contract age, regional unemployment as well as contract rate changes and the contract type. Hence, it is crucial to integrate the significant factors into any reasonable bank risk, portfolio or capital management framework or approaches for structuring and pricing of related products. We illustrate the severe shortcomings of the unconditional ap- proaches. With our results we are able to contribute significantly to the ongoing international discussion about the drivers of residential mortgage risk as well as to suggestions for improved risk management approaches. Finally, our findings are highly relevant for the implementation of the Basel II accord. Keywords: reduced-form, structural approach, default risk, default intensity, mortgages, generalized additive model, CreditRisk+
Author: Jürg Burkhard
Publisher:
ISBN:
Category :
Languages : en
Pages : 71
Get Book Here
Book Description
In June 2003 Swiss banks held over CHF 500 billion in mortgages. This important segment accounts for about 63% of all loan portfolios of Swiss banks. Since default insurance is not common in Switzerland, the corresponding risks are a severe threat for the health of the financial system. We focus the analysis on portfolios of residential mortgages and model the probability distribution of the number of defaults using a non-parametric approach, where the intensity processes associated to the time-to-default is linked to a set of predictors through general smooth functions: A generalized additive model is used to condition default intensities of mortgages on relevant economic risk drivers. We calibrate our model on a large mortgage servicing data set and compare the resulting loss distributions to a well-known benchmark, i.e. the loss distribution from CreditRisk+ as commonly applied in the industry. The conditional loss distribution and risk measures for a large mortgage portfolio are shown to be greatly sensitive to the prevailing socio-economic scenario. We present evidence that aggregated res- idential mortgage default risk is not only driven by the rating but also by variables such as the loan-to-value ratio, contract age, regional unemployment as well as contract rate changes and the contract type. Hence, it is crucial to integrate the significant factors into any reasonable bank risk, portfolio or capital management framework or approaches for structuring and pricing of related products. We illustrate the severe shortcomings of the unconditional ap- proaches. With our results we are able to contribute significantly to the ongoing international discussion about the drivers of residential mortgage risk as well as to suggestions for improved risk management approaches. Finally, our findings are highly relevant for the implementation of the Basel II accord. Keywords: reduced-form, structural approach, default risk, default intensity, mortgages, generalized additive model, CreditRisk+
Author: Karl E. Case
Publisher:
ISBN:
Category : Foreclosure
Languages : en
Pages : 34
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Book Description
Evidence is shown, using US foreclosure data by state 1975-93, that periods of high default rates on home mortgages strongly tend to follow real estate price declines or interruptions in real estate price increase. The relation between price decline and foreclosure rates is modelled using a distributed lag. Using this model, holders of residential mortgage portfolios could hedge some of the risk of default by taking positions in futures or options markets for residential real estate prices, were such markets to be established
Author:
Publisher: Lulu.com
ISBN: 9291316695
Category : Bank capital
Languages : en
Pages : 294
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Book Description
Author: Scott Menard
Publisher: SAGE
ISBN: 9780761922087
Category : Mathematics
Languages : en
Pages : 130
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Book Description
The focus in this Second Edition is again on logistic regression models for individual level data, but aggregate or grouped data are also considered. The book includes detailed discussions of goodness of fit, indices of predictive efficiency, and standardized logistic regression coefficients, and examples using SAS and SPSS are included. More detailed consideration of grouped as opposed to case-wise data throughout the book Updated discussion of the properties and appropriate use of goodness of fit measures, R-square analogues, and indices of predictive efficiency Discussion of the misuse of odds ratios to represent risk ratios, and of over-dispersion and under-dispersion for grouped data Updated coverage of unordered and ordered polytomous logistic regression models.
Author: Vanessa Le Leslé
Publisher: International Monetary Fund
ISBN: 1475502656
Category : Business & Economics
Languages : en
Pages : 50
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Book Description
In this paper, we provide an overview of the concerns surrounding the variations in the calculation of risk-weighted assets (RWAs) across banks and jurisdictions and how this might undermine the Basel III capital adequacy framework. We discuss the key drivers behind the differences in these calculations, drawing upon a sample of systemically important banks from Europe, North America, and Asia Pacific. We then discuss a range of policy options that could be explored to fix the actual and perceived problems with RWAs, and improve the use of risk-sensitive capital ratios.
Author: Christian Bluhm
Publisher: CRC Press
ISBN: 1584889934
Category : Business & Economics
Languages : en
Pages : 386
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Book Description
Contains Nearly 100 Pages of New MaterialThe recent financial crisis has shown that credit risk in particular and finance in general remain important fields for the application of mathematical concepts to real-life situations. While continuing to focus on common mathematical approaches to model credit portfolios, Introduction to Credit Risk Modelin
Author: John D. Kalbfleisch
Publisher: John Wiley & Sons
ISBN: 1118031237
Category : Mathematics
Languages : en
Pages : 462
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Book Description
Contains additional discussion and examples on left truncationas well as material on more general censoring and truncationpatterns. Introduces the martingale and counting process formulation swillbe in a new chapter. Develops multivariate failure time data in a separate chapterand extends the material on Markov and semi Markovformulations. Presents new examples and applications of data analysis.
Author: Anthony Saunders
Publisher: John Wiley & Sons
ISBN: 0470622369
Category : Business & Economics
Languages : en
Pages : 373
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Book Description
A classic book on credit risk management is updated to reflect the current economic crisis Credit Risk Management In and Out of the Financial Crisis dissects the 2007-2008 credit crisis and provides solutions for professionals looking to better manage risk through modeling and new technology. This book is a complete update to Credit Risk Measurement: New Approaches to Value at Risk and Other Paradigms, reflecting events stemming from the recent credit crisis. Authors Anthony Saunders and Linda Allen address everything from the implications of new regulations to how the new rules will change everyday activity in the finance industry. They also provide techniques for modeling-credit scoring, structural, and reduced form models-while offering sound advice for stress testing credit risk models and when to accept or reject loans. Breaks down the latest credit risk measurement and modeling techniques and simplifies many of the technical and analytical details surrounding them Concentrates on the underlying economics to objectively evaluate new models Includes new chapters on how to prevent another crisis from occurring Understanding credit risk measurement is now more important than ever. Credit Risk Management In and Out of the Financial Crisis will solidify your knowledge of this dynamic discipline.
Author: Gene Amromin
Publisher: DIANE Publishing
ISBN: 1437987850
Category : Business & Economics
Languages : en
Pages : 57
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Book Description
CM became a popular borrowing instrument during the bullish housing market of the early 2000s but vanished rapidly during the subsequent downturn. These non-traditional loans (interest only, negative amortization, and teaser mortgages) enable households to postpone loan repayment compared to traditional mortgages and hence relax borrowing constraints. But, they increase household leverage and heighten dependence on mortgage refinancing. CM were chosen by prime borrowers with high income levels seeking to purchase expensive houses relative to their incomes. Borrowers with CM experience substantially higher ex post default rates than borrowers with traditional mortgages with similar characteristics. Illus. This is a print on demand report.
Author: David W. Hosmer, Jr.
Publisher: John Wiley & Sons
ISBN: 0471654027
Category : Mathematics
Languages : en
Pages : 397
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Book Description
From the reviews of the First Edition. "An interesting, useful, and well-written book on logistic regression models . . . Hosmer and Lemeshow have used very little mathematics, have presented difficult concepts heuristically and through illustrative examples, and have included references." —Choice "Well written, clearly organized, and comprehensive . . . the authors carefully walk the reader through the estimation of interpretation of coefficients from a wide variety of logistic regression models . . . their careful explication of the quantitative re-expression of coefficients from these various models is excellent." —Contemporary Sociology "An extremely well-written book that will certainly prove an invaluable acquisition to the practicing statistician who finds other literature on analysis of discrete data hard to follow or heavily theoretical." —The Statistician In this revised and updated edition of their popular book, David Hosmer and Stanley Lemeshow continue to provide an amazingly accessible introduction to the logistic regression model while incorporating advances of the last decade, including a variety of software packages for the analysis of data sets. Hosmer and Lemeshow extend the discussion from biostatistics and epidemiology to cutting-edge applications in data mining and machine learning, guiding readers step-by-step through the use of modeling techniques for dichotomous data in diverse fields. Ample new topics and expanded discussions of existing material are accompanied by a wealth of real-world examples-with extensive data sets available over the Internet.
