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 Integrating Macroeconomic Risk Factors into Credit Portfolio ModelsHamerle, Alfred, Dartsch, Andreas, Jobst, Rainer und Plank, Kilian In: The Journal of Risk Model Validation (Vol. 5, Nr. 2), 3-24
"The recent financial crisis has shown the relevance of macroeconomic factors for forecasting and stress testing credit portfolio models. Despite this, most banks still work with a throught-the-cycle approach. We show how to integrate macroeconomic variables into the risk management system of a bank using a multifactor credit risk model with observable macroeconomic and latent variables. In an empirical study, we compare the point-in-time results of this model with those of a through-the-cycle model and explain the deficiencies of the latter. We also provide a solution for the important case in which the bank´s credit risk model includes no macroeconomic information so that macro-level stress tests and scenario analyses may be executed in a straightforward and consistent way." (Abstract, 3) |