Template-Type: ReDIF-Paper 1.0
Title: Treatment of Double Default Effects within the Granularity Adjustment for Basel II
Author-Name: Sebastian Ebert
Author-Email: sebastianebert@uni-bonn.de
Author-Name: Eva Lütkebohmert
Author-Email: eva.luetkebohmert@uni-bonn.de
Classification-JEL: G31, G28 
Keywords: analytic approximation, Basel II, counterparty risk, double default, granularity 
	adjustment, IRB approach, securitization
Abstract: Within the Internal Ratings-Based (IRB) approach of Basel II it is assumed
	that idiosyncratic risk has been fully diversi?ed away. The impact of undiversi?ed
	idiosyncratic risk on portfolio Value-at-Risk can be quanti?ed via a granularity
	adjustment (GA). We provide an analytic formula for the GA in an extended single-
	factor CreditRisk+ setting incorporating double default e?ects. It accounts for
	guarantees and their e?ect of reducing credit risk in the portfolio. Our general
	GA very well suits for application under Pillar 2 of Basel II as the data inputs are
	drawn from quantities already required for the calculation of IRB capital charges.
Note: 
Length: 29
Creation-Date: 2009-07
Revision-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse10_2009.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse10_2009