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A comparison of the IRB approach and the Standard Approach under CRR for purchased defaulted retail exposures
KTH, School of Engineering Sciences (SCI), Mathematics (Dept.), Mathematical Statistics.
2014 (English)Independent thesis Advanced level (degree of Master (One Year)), 20 credits / 30 HE creditsStudent thesisAlternative title
En jämförelse mellan Internmetoden och Schablonmetodenenligt CRR för förvärvade fallerande hushållsexponeringar (Swedish)
Abstract [en]

We investigate under what circumstances the IRB approach under Regulation (EU) no 575/2013 (Capital Requirements Regulation) renders a lower capital requirement for purchased defaulted retail exposures than under the Standard Approach of the same regulation. We also discuss some alternative approaches to calculating the capital requirement for the mentioned exposures. The results show that it is only beneficial in a few cases to use the IRB approach compared to the Standard Approach. We can also see that the IRB approach in some cases renders a capital requirement that is clearly not reflecting the actual risk. Of the alternative approaches investigated, a Value-at-Risk approach seems most promising for further development.

Abstract [sv]

Vi undersöker under vilka omständigheter Internmetoden enligt Förordning (EU) nr 575/2013 (tillsynsförordningen) ger ett lägre kapitalkrav för förvärvade fallerande hushållsexponeringar än Schablonmetoden enligt samma förordning. Vi diskuterar också några alternativa metoder för att beräkna kapitalkravet för de nämnda exponeringarna. Resultaten visar att det bara är fördelaktigt i ett fåtal fall att använda Internmetoden jämfört med Schablonmetoden. Vi kan också se att Internmetoden ger ett kapitalkrav i vissa fall som tydligt inte återspeglar den faktiska risken. Av de alternativa metoder som undersökts ser en Value-at-Risk-metod mest lovande ut för fortsatt utveckling.

Place, publisher, year, edition, pages
2014.
Series
TRITA-MAT-E, 2014:52
National Category
Mathematical Analysis
Identifiers
URN: urn:nbn:se:kth:diva-150546OAI: oai:DiVA.org:kth-150546DiVA: diva2:747997
External cooperation
ZEB AB
Subject / course
Mathematical Statistics
Educational program
Master of Science in Engineering -Engineering Physics
Supervisors
Examiners
Available from: 2014-09-17 Created: 2014-09-05 Last updated: 2014-09-17Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
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