Forecasting Credit Portfolio Risk

The main challenge of forecasting credit default risk in loan portfolios is forecasting the default probabilities and the default correlations. We derive a Merton-style threshold-value model for the default probability which treats the asset value of a firm as unknown and uses a factor model instead. In addition, we demonstrate how default correlations can be easily modeled. The empirical analysis is based on a large data set of German firms provided by Deutsche Bundesbank. We find that the inclusion of variables which are correlated with the business cycle improves the forecasts of default probabilities. Asset and default correlations depend on the factors used to model default probabilities. The better the point-in-time calibration of the estimated default probabilities, the smaller the estimated correlations. Thus, correlations and default probabilities should always be estimated simultaneously. --asset correlation,bank regulation,Basel II,credit risk,default correlation,default probability,logit model,probit model

Cyber Policy Networks: Zur sozialethischen Bedeutung virtueller Netzwerke in Zeiten der Globalisierung

In diesem Beitrag wird keine theologische Selbstaufklärung anhand des Virtualitätsbegriffs betrieben, so reizvoll das sein mag. Der Virtualitätsbegriff soll hier auch nicht in systematischer Abgrenzung von einem wie auch immer zu fassenden Realitätsbegriff entwickelt werden. Virtualität sei im folgenden vielmehr ein Wort für das Interdependenzverhältnis von medialen Referenten und ihren außermedialen Referenzen. In einem doppelten medienhistorischen Cursus soll es zunächst um dieses Interdependenzverhältnis gehen. Es wird im medienhistorischen Zusammenhang zu fragen zu sein, wie die Spezifika des Digitalen Zeitalters sozialethisch anzusprechen sind. Die These lautet, daß diese Spezifika mit ihren ungeahnten Kommunikationsmögichkeiten nicht nur dem Marktprinzip nützen, sondern auch für das normative Konzept einer marktkorrektiven Netzwerkgesellschaft interessant sind. Was sich hinter dem Begriff Netzwerk verbirgt, muß allerdings eigens geklärt werden. Dann gilt es, die medien- und die gesellschaftstheoretischen Befunde miteinander zu korrelieren, um die eigentliche These des Beitrags zu begründen, für welche der Begriff Cyber Policy Networks (CPNs) steht: Marktkorrektive Politik kann künftig nicht mehr nur über territorialhierarchische Rahmenordnungen implementiert werden. Sie verlangt weltweite, horizontale interdependente Netzwerke, die erst im Cyberspace des Internet ihre ganze Wirksamkeit entfalten

Cyber Policy Networks: Zur sozialethischen Bedeutung virtueller Netzwerke in Zeiten der Globalisierung

In diesem Beitrag wird keine theologische Selbstaufklärung anhand des Virtualitätsbegriffs betrieben, so reizvoll das sein mag. Der Virtualitätsbegriff soll hier auch nicht in systematischer Abgrenzung von einem wie auch immer zu fassenden Realitätsbegriff entwickelt werden. Virtualität sei im folgenden vielmehr ein Wort für das Interdependenzverhältnis von medialen Referenten und ihren außermedialen Referenzen. In einem doppelten medienhistorischen Cursus soll es zunächst um dieses Interdependenzverhältnis gehen. Es wird im medienhistorischen Zusammenhang zu fragen zu sein, wie die Spezifika des Digitalen Zeitalters sozialethisch anzusprechen sind. Die These lautet, daß diese Spezifika mit ihren ungeahnten Kommunikationsmögichkeiten nicht nur dem Marktprinzip nützen, sondern auch für das normative Konzept einer marktkorrektiven Netzwerkgesellschaft interessant sind. Was sich hinter dem Begriff Netzwerk verbirgt, muß allerdings eigens geklärt werden. Dann gilt es, die medien- und die gesellschaftstheoretischen Befunde miteinander zu korrelieren, um die eigentliche These des Beitrags zu begründen, für welche der Begriff Cyber Policy Networks (CPNs) steht: Marktkorrektive Politik kann künftig nicht mehr nur über territorialhierarchische Rahmenordnungen implementiert werden. Sie verlangt weltweite, horizontale interdependente Netzwerke, die erst im Cyberspace des Internet ihre ganze Wirksamkeit entfalten

The empirical relation between credit quality, recovery and correlation

Credit risk is an important issue in many finance areas, such as the determination of cost of capital, the valuation of corporate bonds and pricing of credit derivatives. Credit risk has also been a cause and consequence of the current financial crisis. Thus, methods for measuring credit risk, default probabilities, and recoveries have caught more and more attention in the financial literature. The majority of industry credit portfolio risk models, as well as recent scientific results, are based on isolated modules for default probabilities and recoveries in the event of default. This paper shows that these common methods lead to various econometric drawbacks when the parameters are interpreted and aggregated for risk capital allocation and pricing purposes. This paper provides a top down approach in which individual credit risk parameters are derived analytically from a single model. This model allows for a i) dynamic, ii) consistent, and iii) unbiased modeling of credit portfolio risks. An empirical analysis provides evidence for the inferred relationship between credit quality, recovery and correlation

The value of bank capital buffers in maintaining financial system resilience

© 2017 Elsevier B.V. There is a current controversy concerning the appropriate size of banks’ capital requirements, and the trade-off between the costs and benefits of implementing higher capital requirements. We quantify the size of capital buffers required to reduce system-wide losses using confidential regulatory data for Australian banks from 2002 to 2014 and annual public accounts from 1978 to 2014. We find that a moderate increase in bank capital buffers is sufficient to maintain financial system resilience, even after taking economic downturns into consideration. Furthermore, while banks benefit from paying a lower cost of debt when they have a higher capital buffer, lending volumes are lower indicating that credit supply may be hampered if bank capital levels are too high within a financial system

The role of model risk in extreme value theory for capital adequacy

© 2016 Incisive Risk Information (IP) Limited. In the recent literature, methods from extreme value theory (EVT) have frequently been applied to the estimation of tail risk measures. While previous analyses show that EVT methods often lead to accurate estimates for risk measures, a potential drawback lies in large standard errors of the point estimates in these methods, as only a fraction of the data set is used. Thus, we comprehensively study the impact of model risk on EVT methods when determining the value-at-risk and expected shortfall. We distinguish between first-order effects of model risk, which consist of misspecification and estimation risk, and second-order effects of model risk, which refer to the dispersion of risk measure estimates, and show that EVT methods are less prone to first-order effects. However, they show a greater sensitivity toward secondorder effects.We find that this can lead to severe value-at-risk and expected shortfall underestimations and should be reflected in regulatory capital models

Evaluation of the coordinated undergraduate program in dietetics at Kansas State University

Call number: LD2668 .T4 1985 S3

A randomised, double-blind, placebo-controlled trial of repeated nebulisation of non-viral cystic fibrosis transmembrane conductance regulator (CFTR) gene therapy in patients with cystic fibrosis

BACKGROUND: Cystic fibrosis (CF) is a chronic, life-limiting disease caused by mutations in the CF transmembrane conductance regulator (CFTR) gene leading to abnormal airway surface ion transport, chronic lung infections, inflammation and eventual respiratory failure. With the exception of the small-molecule potentiator, ivacaftor (Kalydeco®, Vertex Pharmaceuticals, Boston, MA, USA), which is suitable for a small proportion of patients, there are no licensed therapies targeting the basic defect. The UK Cystic Fibrosis Gene Therapy Consortium has taken a cationic lipid-mediated CFTR gene therapy formulation through preclinical and clinical development. OBJECTIVE: To determine clinical efficacy of the formulation delivered to the airways over a period of 1 year in patients with CF. DESIGN: This was a randomised, double-blind, placebo-controlled Phase IIb trial of the CFTR gene–liposome complex pGM169/GL67A. Randomisation was performed via InForm™ version 4.6 (Phase Forward Incorporated, Oracle, CA, USA) and was 1 : 1, except for patients in the mechanistic subgroups (2 : 1). Allocation was blinded by masking nebuliser chambers. SETTINGS: Data were collected in the clinical and scientific sites and entered onto a trial-specific InForm, version 4.6 database. PARTICIPANTS: Patients with CF aged ≥ 12 years with forced expiratory volume in the first second (FEV1) between 50% and 90% predicted and any combination of CFTR mutations. The per-protocol group (≥ 9 doses) consisted of 54 patients receiving placebo (62 randomised) and 62 patients receiving gene therapy (78 randomised). INTERVENTIONS: Subjects received 5 ml of nebulised pGM169/G67A (active) or 0.9% saline (placebo) at 28 (±5)-day intervals over 1 year. MAIN OUTCOME MEASURES: The primary end point was the relative change in percentage predicted FEV1 over the 12-month period. A number of secondary clinical outcomes were assessed alongside safety measures: other spirometric values; lung clearance index (LCI) assessed by multibreath washout; structural disease on computed tomography (CT) scan; the Cystic Fibrosis Questionnaire – Revised (CFQ-R), a validated quality-of-life questionnaire; exercise capacity and monitoring; systemic and sputum inflammatory markers; and adverse events (AEs). A mechanistic study was performed in a subgroup in whom transgene deoxyribonucleic acid (DNA) and messenger ribonucleic acid (mRNA) was measured alongside nasal and lower airway potential difference. RESULTS: There was a significant (p = 0.046) treatment effect (TE) of 3.7% [95% confidence interval (CI) 0.1% to 7.3%] in the primary end point at 12 months and in secondary end points, including forced vital capacity (FVC) (p = 0.031) and CT gas trapping (p = 0.048). Other outcomes, although not reaching statistical significance, favoured active treatment. Effects were noted by 1 month and were irrespective of sex, age or CFTR mutation class. Subjects with a more severe baseline FEV1 had a FEV1 TE of 6.4% (95% CI 0.8% to 12.1%) and greater changes in many other secondary outcomes. However, the more mildly affected group also demonstrated benefits, particularly in small airway disease markers such as LCI. The active group showed a significantly (p = 0.032) greater bronchial chloride secretory response. No difference in treatment-attributable AEs was seen between the placebo and active groups. CONCLUSIONS: Monthly application of the pGM169/GL67A gene therapy formulation was associated with an improvement in lung function, other clinically relevant parameters and bronchial CFTR function, compared with placebo. LIMITATIONS: Although encouraging, the improvement in FEV1 was modest and was not accompanied by detectable improvement in patients’ quality of life. FUTURE WORK: Future work will focus on attempts to increase efficacy by increasing dose or frequency, the coadministration of a CFTR potentiator, or the use of modified viral vectors capable of repeated administration. TRIAL REGISTRATION: ClinicalTrials.gov NCT01621867

Impact of mortgage soft information in loan pricing on default prediction using machine learning

We analyze the impact of soft information on US mortgages for default prediction and provide a new measure for lender soft information that is based on the interest rates offered to borrowers and incremental to public hard information. Hard and soft information provide for a variation in annual default probabilities of approximately 3%. Soft information has a lesser impact over time and time since origination. Lenders rely more on soft information for high-risk borrowers. Our study evidences the importance of soft information collected at loan origination