Provisions and economic capital for credit losses†
Based on supermodularity ordering properties, we show that convex risk measures of credit losses are nondecreasing w.r.t. credit-credit and, in a wrong-way risk setup, credit-market, covariances of elliptically distributed latent factors. These results support the use of such setups for computing credit provisions and economic capital or for conducting stress test exercises and risk management analysis.
Authors
- Dorinel Bastide
- Stéphane Crépey (ORCID: https://orcid.org/0000-0001-9409-1748)
Institutions
- Centre National de la Recherche Scientifique (FR)
- Université Paris Cité (FR)
- Laboratoire de Mathématiques Blaise Pascal (FR)
- Laboratoire de Mathématiques et Modélisation d'Évry (FR)
- Laboratoire de Probabilités, Statistique et Modélisation (FR)
- Université d'Évry Val-d'Essonne (FR)
- BNP Paribas (France) (FR)
Publication Details
- Journal
- Quantitative Finance
- Published
- 2025-03-26
- DOI
- https://doi.org/10.1080/14697688.2025.2472897
- Primary Topic
- Risk and Portfolio Optimization
- Type
- article
- Field-Weighted Citation Impact
- 0.00
Funders
- BNP Paribas Cardif