Recent studies find a positive correlation between default and loss given default rates of credit portfolios. In response, financial regulators require financial institutions to base their capital on the 'Downturn' loss rate given default which is also known as Downturn LGD. This article...

This study analyses the level of systematic risk for US mortgage portfolio securitisationsbased on the variation of default rates which cannot be explained by observeddeterministic factors. Systematic risk is decomposed into general systemic risk, ratingclass-specific systematic risk and their...

This paper analyzes the sensitivity to systematic credit risk and pricing in fixed income instruments and compares corporate bonds and asset securitizations. The paper finds cross-sectional variation of systematic credit risk given the same credit rating and a market premium for the systematic...

This paper provides a theoretical and empirical analysis of alternative discount rate concepts for computing LGDs using historical bank workout data. It benchmarks five discount rate concepts for workout recovery cash flows to derive observed Loss rates Given Default (LGDs) in terms of economic...

This paper analyzes the level and cyclicality of regulatory bank capital for asset portfolio securitizations in relation to the cyclicality of capital requirements for the underlying loan portfolio as under Basel II/III. We find that the cyclicality of capital requirements is higher for (i)...

This paper offers a joint estimation approach for forecasting probabilities of default and loss rates given default in the presence of selection. The approach accommodates fixed and random risk factors. An empirical analysis identifies bond ratings, borrower characteristics and macroeconomic...

This paper develops a framework to measure the exposure to systematic risk for pools of asset securitizations and measures empirically whether current ratings-based rules for regulatory capital of securitizations under Basel II and Basel III reflect this exposure. The analysis is based on a...

The Global Financial Crisis exposed financial institutions to severe unexpected losses in relation to mortgage securitizations and derivatives. This paper analyzes a unique and extensive ratings and impairment events database for securitizations. The paper finds that risk models such as ratings...

The Global Financial Crisis highlighted that default and recovery rates of multiple borrowers generally deteriorate jointly during economic downturns. The vast majority of the literature, as well as many industry credit portfolio risk models ignore this and analyze default probabilities and...

This paper provides an empirical study, which assesses the historical performance of credit rating agency (CRA) ratings for securitizations before and during the financial crisis. The paper finds that CRAs do not sufficiently address the systematic risk of the underlying collateral pools as well...