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A Comparative Analysis of Credit Risk Management Models for Banking Industry Using Simulation

  • Hsin-Hung Chen
  • Ben-Chang Shia
  • Hsiu-Yu Lee
Conference paper
Part of the Communications in Computer and Information Science book series (CCIS, volume 208)

Abstract

Risk management is an issue that has become increasingly important. Basel II Accord has been widely discussed since it was proposed. However, the comparative analysis of CreditMetrics with Basel II Accord has not been found in previous literatures. The objective of this study is to compare CreditMetrics with Basel II Accord using empirical data and simulation programs. Moreover, the fitness of the standard for Basel II Accord which proposed the minimum requirement of 8% of capital to risk-weighted assets is discussed in this study. The records of the data system in a bank listed by the Taiwan Stock Exchange Corporation (TSEC) were used as the empirical data in this research. The results showed that the expected loss calculated by the 8% capital ratio defined in Basel II is clearly lower than the Credit VaR obtained from the CreditMetrics model.

Keywords

Basel II Accord CreditMetrics credit risk Value-at-Risk (VaR) 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Hsin-Hung Chen
    • 1
  • Ben-Chang Shia
    • 2
  • Hsiu-Yu Lee
    • 1
  1. 1.Department of Business AdministrationCheng Shiu UniversityKaohsiung CityTaiwan
  2. 2.Department of Statistics and Information ScienceFu Jen Catholic UniversityTaiwan

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