Template-Type: ReDIF-Paper 1.0
Title: Improved Modeling of Double Default Effects in Basel II - An Endogenous Asset Drop Model without Additional Correlation
Author-Name: Sebastian Ebert
Author-Email: sebastianebert@uni-bonn.de
Author-Name: Eva Lütkebohmert
Author-Email: eva.luetkebohmert@wvf.uni-freiburg.de
Classification-JEL: G31, G28
Keywords: Basel II, double default, IRB approach, regulatory capital, structural credit portfolio models
Abstract: In 2005 the Internal Ratings Based (IRB) approach of `Basel II' was
	enhanced by a `treatment of double default effects' to account for
	credit risk mitigation techniques such as ordinary
	guarantees or credit derivatives. This paper reveals several severe
	problems of this approach and presents a new method to account for
	double default effects. This new it asset drop technique can be
	applied within any structural model of portfolio credit risk. When
	formulated within the IRB approach of Basel II, it is very well
	suited for practical application as it does not pose extensive
	data requirements and economic capital can still be computed
Note: 
Length: 23
Creation-Date: 2009-10
Revision-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse24_2009_2.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse24_2009