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Systematic credit cycle risk of financial collaterals: modelling and evidence

[working paper]

Gürtler, Marc; Heithecker, Dirk

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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 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)
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
Licence Deposit Licence - No Redistribution, No Modifications
data provider This metadata entry was indexed by the Special Subject Collection Social Sciences, USB Cologne