Correlations and Business Cycles of Credit Risk: Evidence from Bankruptcies in Germany

A major topic in empirical finance is correlation of default risk. Correlations are the main drivers for credit risk on a portfolio basis and for banks� capital requirements under the New Basel Accord. However, empirical evidence on the magnitude of correlations is rather scarce, mainly due to data limitations. Using a large database of bankruptcies in Germany we estimate correlations using a simple version of the Basel II factor model. Then we extend the model to an approach with observable risk factors and suggest that this model with default probabilities depending on the state of the economy may be more adequate. Empirical evidence on proxies for the credit cycles is presented for German industry sectors. We find that much of the co-movements can be explained by our variables. Finally, we discuss some implications for forecasts of distributions of potential future defaults of a bank�s portfolio. Ein wichtiges Gebiet im Bereich der empirischen Finanzwirtschaft stellen Korrelationen von Kreditausfällen dar. Sowohl in Kreditportfoliomodellen als auch für die Eigenkapitalanforderungen von Banken im Neuen Basler Akkord sind sie die Haupttreiber von Kreditrisiken. Allerdings sind empirische Ergebnisse über die Größenordnungen von Korrelationen hauptsächlich aufgrund unzureichender Datenlage bislang äußerst selten zu finden. Der vorliegende Beitrag schätzt zunächst mit Hilfe einer einfachen statischen Version des Basel II Faktormodells Ausfallwahrscheinlichkeiten und Korrelationen anhand einer großen Datenbank deutscher Unternehmen. Das einfache Modell wird anschließend um beobachtbare makroökonomische Risikofaktoren erweitert und die Ausfallwahrscheinlichkeiten werden in Abhängigkeit des aktuellen Stands der Konjunktur modelliert. Es stellt sich heraus, dass ein großer Teil der im einfachen Modell vorhandenen Korrelationen durch die Risikofaktoren erklärt werden kann. Schließlich werden für die jeweiligen Modelle Implikationen für Verlustprognosen von Bankenportfolien aufgezeigt.Kreditrisiko; ; Credit risk dependencies ; credit risk models

Understanding personal data as a space - learning from dataspaces to create linked personal data

In this paper we argue that the space of personal data is a dataspace as defined by Franklin et al. We define a personal dataspace, as the space of all personal data belonging to a user, and we describe the logical components of the dataspace. We describe a Personal Dataspace Support Platform (PDSP) as a set of services to provide a unified view over the user’s data, and to enable new and more complex workflows over it. We show the differences from a DSSP to a PDSP, and how the latter can be realized using Web protocols and Linked APIs.<br/

Credit Risk Factor Modeling and the Basel II IRB Approach

Default probabilities (PDs) and correlations play a crucial role in the New Basel Capital Accord. In commercial credit risk models they are an important constituent. Yet, modeling and estimation of PDs and correlations is still under active discussion. We show how the Basel II one factor model which is used to calibrate risk weights can be extended to a model for estimating PDs and correlations. The important advantage of this model is that it uses actual information about the point in time of the credit cycle. Thus, uncertainties about the parameters which are needed for Value-at-Risk calculations in portfolio models may be substantially reduced. First empirical evidence for the appropriateness of the models and underlying risk factors is given with S&P data. --Credit Risk,Credit Ratings,Probability of Default,Bank Regulation

Fracture of complex metallic alloys: An atomistic study of model systems

Molecular dynamics simulations of crack propagation are performed for two extreme cases of complex metallic alloys (CMAs): In a model quasicrystal the structure is determined by clusters of atoms, whereas the model C15 Laves phase is a simple periodic stacking of a unit cell. The simulations reveal that the basic building units of the structures also govern their fracture behaviour. Atoms in the Laves phase play a comparable role to the clusters in the quasicrystal. Although the latter are not rigid units, they have to be regarded as significant physical entities.Comment: 6 pages, 4 figures, for associated avi file, see http://www.itap.physik.uni-stuttgart.de/~frohmut/MOVIES/C15.LJ.011.100.av