Credit Loss Elasticity Model (Rule of Thumb)

20 Pages Posted: 25 Jun 2019

See all articles by Zane L. Swanson

Zane L. Swanson

University of Central Oklahoma

Aminat Aloba

University of Central Oklahoma

Date Written: June 21, 2019

Abstract

Elasticity is a well-known concept that has been applied in numerous diverse situations. This study develops an elasticity relation between loan balances and their associated credit loss. This elasticity relation can be applied as a “rule of thumb” approach for measurement and forecasting. The empirical results are significant at conventional levels for the elasticity.

Keywords: CECL standard, Estimated losses, Financial institutions, Economic elasticity

JEL Classification: M41,G21

Suggested Citation

Swanson, Zane L. and Aloba, Aminat, Credit Loss Elasticity Model (Rule of Thumb) (June 21, 2019). Available at SSRN: https://ssrn.com/abstract=3407948 or http://dx.doi.org/10.2139/ssrn.3407948

Zane L. Swanson (Contact Author)

University of Central Oklahoma ( email )

100 North University Drive
Edmond, OK 73034
United States

Aminat Aloba

University of Central Oklahoma ( email )

100 North University Drive
Edmond, OK 73034
United States

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