Least Impulse Response Estimator for Stress Test Exercises

33 Pages Posted: 4 Aug 2018

See all articles by Christian Gourieroux

Christian Gourieroux

University of Toronto - Department of Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO); Ecole Nationale de la Statistique et de l'Administration Economique (ENSAE); National Bureau of Economic Research (NBER)

Yang Lu

Department of Maths & Statis, Concordia University

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

Gourieroux, Christian and Lu, Yang, Least Impulse Response Estimator for Stress Test Exercises (July 16, 2018). Available at SSRN: https://ssrn.com/abstract=3214789 or http://dx.doi.org/10.2139/ssrn.3214789

Christian Gourieroux

University of Toronto - Department of Economics ( email )

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Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

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Ecole Nationale de la Statistique et de l'Administration Economique (ENSAE) ( email )

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Yang Lu (Contact Author)

Department of Maths & Statis, Concordia University ( email )

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