Economic capital and rating: Analysis and minimum requirements
Tipo
Artigo
Data de publicação
2016
Periódico
Espacios
Citações (Scopus)
0
Autores
Barboza F.
Kimura H.
Basso L.F.C.
Sobreiro V.A.
Kimura H.
Basso L.F.C.
Sobreiro V.A.
Orientador
Título da Revista
ISSN da Revista
Título de Volume
Membros da banca
Programa
Resumo
Economic capital (EC) is one of the most important measures for banks to manage risk. Here, we use probability of default (PD) and loss given default (LGD) data of different risk ratings as inputs to compute EC. Our analysis shows how banks can improve their own ratings based on the borrower's credit quality for different LGD values. Using a simulation procedure, we compare EC of banks with different ratings. We conclude that banks could achieve better ratings when lending to companies with reasonably lower LGD and can lower EC by picking borrowers with specific PD-LGD profiles.