A Note on the Vasicek’s Model with the Logistic Distribution

15 Pages Posted: 20 Aug 2012

See all articles by Jiri Witzany

Jiri Witzany

University of Economics in Prague

Date Written: August 20, 2012


The paper argues that it would be natural to replace the standard normal distribution function by the logistic function in the regulatory Basel II (Vasicek’s) formula. Such a model would be in fact consistent with the standard logistic regression PD modeling approach. An empirical study based on US commercial bank’s loan historical delinquency rates re-estimates the default correlations and unexpected losses for the normal and logistic distribution models. The results indicate that the capital requirements could be up to 90-100% higher if the normal Vasicek’s model was replaced by the logistic one.

Keywords: credit risk, Basel II regulation, default rates

JEL Classification: G20, G28, C51

Suggested Citation

Witzany, Jiri, A Note on the Vasicek’s Model with the Logistic Distribution (August 20, 2012). Available at SSRN: https://ssrn.com/abstract=2132583 or http://dx.doi.org/10.2139/ssrn.2132583

Jiri Witzany (Contact Author)

University of Economics in Prague ( email )

Winston Churchilla Sq. 4
Prague 3, 130 67
Czech Republic

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics