Exposure at Default Modeling with Default Intensities

29 Pages Posted: 1 Sep 2014 Last revised: 11 Dec 2014

See all articles by Jiri Witzany

Jiri Witzany

University of Economics in Prague

Date Written: November 30, 2011

Abstract

The paper provides an overview of the Exposure at Default (EAD) definition, requirements, and estimation methods as set by the Basel II regulation. A new methodology connected to the intensity of default modeling is proposed. The numerical examples show that various estimation techniques may lead to quite different results with intensity of default based model being recommended as the most faithful with respect to a precise probabilistic definition of the EAD parameter.

Keywords: Credit risk; Exposure at default; Default intensity; Regulatory capital

JEL Classification: G21, G28, C14

Suggested Citation

Witzany, Jiri, Exposure at Default Modeling with Default Intensities (November 30, 2011). Available at SSRN: https://ssrn.com/abstract=2489672 or http://dx.doi.org/10.2139/ssrn.2489672

Jiri Witzany (Contact Author)

University of Economics in Prague ( email )

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

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