Provisions and Economic Capital for Credit Losses
Risk Management
2024-12-09 v3 Probability
General Finance
Abstract
Based on supermodularity ordering properties, we show that convex risk measures of credit losses are nondecreasing w.r.t. credit-credit and, in a wrong-way risk setup, credit-market, covariances of elliptically distributed latent factors. These results support the use of such setups for computing credit provisions and economic capital or for conducting stress test exercises and risk management analysis.
Keywords
Cite
@article{arxiv.2401.07728,
title = {Provisions and Economic Capital for Credit Losses},
author = {Dorinel Bastide and Stéphane Crépey},
journal= {arXiv preprint arXiv:2401.07728},
year = {2024}
}