Measuring credit risk of a bank’s corporate loan portfolio using advanced internal ratings base approach

dc.authorscopusid14052917000
dc.authorscopusid14051604700
dc.authorscopusid14053005700
dc.contributor.authorTeker,S.
dc.contributor.authorAkçay,B.
dc.contributor.authorTuran,M.
dc.date.accessioned2024-05-25T12:31:00Z
dc.date.available2024-05-25T12:31:00Z
dc.date.issued2006
dc.departmentOkan Universityen_US
dc.department-tempTeker S., School of Business, Okan University, Istanbul, Uzuncayir cad. No. 6, Hasanpasa-Kadikoy, Turkey; Akçay B.; Turan M.en_US
dc.description.abstractThe use of technical and advanced approaches in the measurement of credit risk of banks’ portfolios has nowadays become a very hot issue. The most recent technical report issued by the Basel Committee in May 2003 has concentrated heavily on the measurement of credit risk using either foundation or advanced Internal Ratings Base (IRB) approaches. This empirical research study attempts to measure credit risk of a bank’s corporate loan portfolio, including firms from 10 different Turkish sectors. The monthly observations of the total amount of corporate loans and the total amount of corporate loans at default across various sectors are downloaded from the web page of Central Bank of Turkey (CBT) in a period of 1999-2002. This period covers 47 monthly observations since CBT has captured sectoral corporate loans beginning of 1999. Therefore, the observed sectoral default rates are needed to be simulated to obtain a nicely shaped distribution. Monte Carlo simulation is applied for 1,000 times. Based on the simulated default rates, the expected sec-toral default rates are computed. Next, a credit quality rating scale is fitted into sectoral default rates distributions. Finally, the sectoral weights in the whole loan portfolio are multiplied by the expected sectoral default rates matrix, considering cross-sectoral correlations to get the total amount of the bank’s credit risk and capital requirement. It is assumed that sectoral monthly default rates are a good representative of the default risk of a sample bank’s corporate loan portfolio since no publicly available data on any particular bank’s corporate loan portfolio composition exists. Nevertheless, this research may be a good application for measuring the credit risk of banks’ corporate loan portfolios using advanced IRB approach. © 2006, Taylor & Francis Group, LLC. All rights reserved.en_US
dc.identifier.citation2
dc.identifier.doi10.1300/J482v11n01_03
dc.identifier.endpage40en_US
dc.identifier.issn1547-5778
dc.identifier.issue1en_US
dc.identifier.scopus2-s2.0-33746560836
dc.identifier.scopusqualityQ3
dc.identifier.startpage17en_US
dc.identifier.urihttps://doi.org/10.1300/J482v11n01_03
dc.identifier.urihttps://hdl.handle.net/20.500.14517/2235
dc.identifier.volume11en_US
dc.identifier.wosqualityN/A
dc.language.isoenen_US
dc.relation.ispartofJournal of Transnational Managementen_US
dc.relation.publicationcategoryMakale - Uluslararası Hakemli Dergi - Kurum Öğretim Elemanıen_US
dc.rightsinfo:eu-repo/semantics/closedAccessen_US
dc.subjectBank’s capital requirementen_US
dc.subjectCredit risken_US
dc.subjectIRB approachen_US
dc.titleMeasuring credit risk of a bank’s corporate loan portfolio using advanced internal ratings base approachen_US
dc.typeArticleen_US
dspace.entity.typePublication

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