Title

Transitional Credit Modelling and its Relationship to Market Value at Risk: an Australian sectoral perspective

Document Type

Journal Article

Publisher

Wiley-Blackwell

Faculty

Business and Law

School

Accounting, Finance and Economics

RAS ID

8657

Comments

This article was originally published as: Allen, D. E., & Powell, R. (2009). Transitional Credit Modelling and its Relationship to Market Value at Risk: an Australian sectoral perspective. Accounting and Finance, 49(3), 425-444. Original article available here

Abstract

Internal credit risk modelling is important for banks for the calculation of capital adequacy in terms of the Basel Accords, and for the management of sectoral exposure. We examine Credit Value at Risk (VaR), Conditional Credit Value at Risk (Credit CVaR) and the relationship between market and credit risk. Signifi- cant association is found between different Credit CVaR methods, and between market and credit risk. Simpler Credit CVaR methods are found to be viable alternatives to more complex methodology. The relationship between market and credit risk is used to develop a new model that allows banks to incorporate industry risk into transition modelling, without macroeconomic analysis.

DOI

10.1111/j.1467-629X.2009.00294.x

 

Link to publisher version (DOI)

10.1111/j.1467-629X.2009.00294.x