Least Impulse Response Estimator for Stress Test Exercises
33 Pages Posted: 4 Aug 2018
Date Written: July 16, 2018
Abstract
We introduce new semi-parametric models for the analysis of rates and proportions, such as proportions of default, (expected) loss-given-default and credit conversion factor encountered in credit risk analysis. These models are especially convenient for stress test exercises. We show that minimizing the estimated effect of a stress leads to consistent estimates. The new models with their associated estimation method are compared with the other approaches currently proposed in the literature such as the beta, and logistic regressions.
Keywords: Basel Regulation, Stress Test, Loss-Given-Default, Impulse Response, Pseudo-Maximum Likelihood, LIR Estimation, Beta Regression, Moebius Transformation
JEL Classification: C51, G21
Suggested Citation: Suggested Citation