A dynamic Bayesian approach for probability of default and stress test
| Autor: | Yousung Park, Taeyoung Kim |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
Statistics and Probability
Applied Mathematics 05 social sciences Bayesian probability Logistic regression Bayesian inference 01 natural sciences 010104 statistics & probability Probability of default Stress test Modeling and Simulation 0502 economics and business Economics Econometrics Business cycle Default 0101 mathematics Statistics Probability and Uncertainty Finance Financial statement 050205 econometrics |
| Zdroj: | Communications for Statistical Applications and Methods. 27:579-588 |
| ISSN: | 2383-4757 |
| DOI: | 10.29220/csam.2020.27.5.579 |
| Popis: | Obligor defaults are cross-sectionally correlated as obligors share common economic conditions; in addition obligors are longitudinally correlated so that an economic shock like the IMF crisis in 1998 lasts for a period of time. A longitudinal correlation should be used to construct statistical scenarios of stress test with which we replace a type of artificial scenario that the banks have used. We propose a Bayesian model to accommodate such correlation structures. Using 402 obligors to a domestic bank in Korea, our model with a dynamic correlation is compared to a Bayesian model with a stationary longitudinal correlation and the classical logistic regression model. Our model generates statistical financial statement under a stress situation on individual obligor basis so that the genearted financial statement produces a similar distribution of credit grades to when the IMF crisis occurred and complies with Basel IV (Basel Committee on Banking Supervision, 2017) requirement that the credit grades under a stress situation are not sensitive to the business cycle. |
| Databáze: | OpenAIRE |
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