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Modeling credit risk for an SME loan portfolio: An Error Correction Model approach
Umeå University, Faculty of Science and Technology, Department of Mathematics and Mathematical Statistics.
2017 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

Sedan den globala finanskrisen 2008 har flera stora regelverk införts för att säkerställa att banker hanterar risker på sunt sätt. Bland dessa regelverk är Basel II som infört kapitalkrav för kreditrisk som baseras på Sannolikhet för Fallissemang och Förlust Givet Fallissemang. Basel II Advanced Internal-Based Approach ger banker möjligheten att skatta dessa riskmått för enskilda portföljer och göra interna kreditriskvärderingar. I överensstämmelse med Advanced Internal-Based-rating undersöker denna uppsats användningen av en Error Correction Model för modellering av Sannolikhet för Fallissemang. En modell som visat sin styrka inom stresstestning. Vidare implementeras en funktion för Förlust Givet Fallissemang som binder samman Sannolikhet för Fallissemang och Förlust Givet Fallissemang med systematisk risk.

Error Correction Modellen modellerar Sannolikhet för Fallissemang av en SME-portfölj från en av de "fyra stora" bankerna i Sverige. Modellen utvärderas och stresstestas med Europeiska Bankmyndighetens  stresstestscenario 2016  och analyseras, med lovande resultat.

Abstract [sv]

Since the global financial crisis of 2008, several big regulations have been implemented to assure that banks follow sound risk management. Among these are the Basel II Accords that implement capital requirements for credit risk. The core measures of credit risk evaluation are the Probability of Default and Loss Given Default. The Basel II Advanced Internal-Based-Rating Approach allows banks to model these measures for individual portfolios and make their own evaluations. This thesis, in compliance with the Advanced Internal-Based-rating approach, evaluates the use of an Error Correction Model when modeling the Probability of Default. A model proven to be strong in stress testing. Furthermore, a Loss Given Default function is implemented that ties Probability of Default and Loss Given Default to systematic risk.

The Error Correction Model is implemented on an SME portfolio from one of the "big four" banks in Sweden. The model is evaluated and stress tested with the European Banking Authority's 2016 stress test scenario and analyzed, with promising results. 

Place, publisher, year, edition, pages
2017. , 30 p.
Keyword [en]
Error Correction Model, Credit risk, Risk management, Regression, Econometrics, Mathematical analysis, Probability of Default, Loss Given Default, Finance, Mathematical modeling
Keyword [sv]
Kreditrisk, Risk hantering, Finans, Ekonometri, Matematisk modellering, Sannolikhet för Fallissemang, Förlust givet Fallissemang
National Category
Economics and Business Mathematical Analysis
Identifiers
URN: urn:nbn:se:umu:diva-136176OAI: oai:DiVA.org:umu-136176DiVA: diva2:1109660
Educational program
Master of Science in Engineering and Management
Supervisors
Examiners
Available from: 2017-06-14 Created: 2017-06-14 Last updated: 2017-06-14Bibliographically approved

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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • harvard1
  • ieee
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  • vancouver
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  • de-DE
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