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19.3 regulatory irb validation

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crmbasel

Credit risk management

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Example Index Copyright 2018 CapitaLogic Limited Example Description Excel technique 1 Binomial test CCC = 0 2 Binomial test CCC formulas 3 Chi-square test This Excel workbook is prepared in accordance with Chapter 19 of the text book "Managing Credit Risk Under The Basel III Framework, 3 rd ed" Authored by :Dr. LAM Yat-fai (林日辉) Principal, Structured Products Analytics, CapitaLogic Limited Adjunct Professor of Finance, City University of Hong Kong Doctor of Business Administration CFA, CAIA, CAMS, FRM, PRM Website: https://sites.google.com/site/crmbase E-mail: crmbasel@gmail.com Copyright 2018 CapitaLogic Limited
Example 1 Binomial test CCC = 0 Credit rating BBB PD 0.3345% NOB 10,000 Confidence level 90% No. of defaults 41 Copyright 2018 CapitaLogic Limited
Example 2 Binomial test CCC formulas Credit rating BBB PD 0.3345% NOB 10,000 CCC 0.221519 Confidence level 90% Default rate 0.8425% No. of defaults 84.24529 Copyright 2018 CapitaLogic Limited
Example 3 Chi-square test Rating PD NOB Expected Observed AAA 0.0100% 3547 0.3547 2 AA 0.0333% 8554 2.848482 2 A 0.0834% 2145 1.78893 3 BBB 0.3345% 921 3.080745 3 BB 2.5652% 7726 198.1874 196 B 7.1682% 4075 292.1042 290 CCC 15.6567% 5870 919.0483 918 CC 29.5270% 8563 2528.397 2530 C 63.1597% 8033 5073.619 5075 p-value 63.60% Copyright 2018 CapitaLogic Limited

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19.3 regulatory irb validation

  • 1. Example Index Copyright 2018 CapitaLogic Limited Example Description Excel technique 1 Binomial test CCC = 0 2 Binomial test CCC formulas 3 Chi-square test This Excel workbook is prepared in accordance with Chapter 19 of the text book "Managing Credit Risk Under The Basel III Framework, 3 rd ed" Authored by :Dr. LAM Yat-fai (林日辉) Principal, Structured Products Analytics, CapitaLogic Limited Adjunct Professor of Finance, City University of Hong Kong Doctor of Business Administration CFA, CAIA, CAMS, FRM, PRM Website: https://sites.google.com/site/crmbase E-mail: crmbasel@gmail.com Copyright 2018 CapitaLogic Limited
  • 2. Example 1 Binomial test CCC = 0 Credit rating BBB PD 0.3345% NOB 10,000 Confidence level 90% No. of defaults 41 Copyright 2018 CapitaLogic Limited
  • 3. Example 2 Binomial test CCC formulas Credit rating BBB PD 0.3345% NOB 10,000 CCC 0.221519 Confidence level 90% Default rate 0.8425% No. of defaults 84.24529 Copyright 2018 CapitaLogic Limited
  • 4. Example 3 Chi-square test Rating PD NOB Expected Observed AAA 0.0100% 3547 0.3547 2 AA 0.0333% 8554 2.848482 2 A 0.0834% 2145 1.78893 3 BBB 0.3345% 921 3.080745 3 BB 2.5652% 7726 198.1874 196 B 7.1682% 4075 292.1042 290 CCC 15.6567% 5870 919.0483 918 CC 29.5270% 8563 2528.397 2530 C 63.1597% 8033 5073.619 5075 p-value 63.60% Copyright 2018 CapitaLogic Limited