This paper presents three possible methods by which the credit value at risk estimates coming from the Basel II IRB approach can be significantly improved upon. The feasibility of the suggested approaches is substantiated by applying it to an exemplary model portfolio.

This article shows how to estimate the conditional density of daily changes in the 3-month T-bill rate, using an extension of the kernel-based estimator proposed by Rosenblatt (1969). The shape of the estimated density is allowed to vary with both the level and the lagged change in rates. Due to...