The impact of PD/LGD correlations on credit risk capital
Guido Giese applies econometric estimates of correlations between default rates and loss given default rates to modern credit portfolio models to quantify their impact on the calculation of credit risk capital
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Empirical studies show that default probabilities and loss given defaults of corporate counterparties are positively correlated due to their common dependency on the businesscycle. Guido Giese applies econometric estimates of correlations between default rates and loss given default rates to modern credit portfolio models to quantify their impact on the calculation of credit risk capital
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