Lucas, A. [Promotor]Koopman, S.J. [Promotor

Schwaab, B.

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Credit Risk and State Space Methods
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Bernd Schwaab
Vrije Universiteit Amsterdam
Research Series
Credit risk is the main risk in the banking book. As a result, time-varying 
credit risk conditions matter for intermediaries’ profitability, solvency,
and overall financial stability. This dissertation studies various aspects
of joint credit and macro-financial conditions, in particular how these
interact and lead to default clusters. Important sources of systematic
default rate variation, such as contagion risk, the business cycle, the 
default cycle, shifts in credit supply, etc., are time varying and inherently 
unobserved. These time-varying factors are known to econometricians
as unobserved components. These components can be backed out from 
observed data using filtering and smoothing methods. This thesis consists 
of four main essays, each applying state space methods to a credit risk
problem at hand. As such, this thesis increases our understanding of
interrelated credit and macro-financial conditions, in particular before
and during financial crises such as the most recent one. 
Bernd Schwaab (1978) graduated cum laude from the Tinbergen Institute’s 
MPhil program in 2007 with a concentration in Econometrics and Finance. 
He started a PhD at Tinbergen Institute and VU University Amsterdam in the 
same year. As of August 2010 he has been working as a Research Economist 
at the European Central Bank, Financial Research Division.
488


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VU Research PortalCredit Risk and State Space MethodsSchwaab, B.2011document versionPublisher's PDF, also known as Version of recordLink to publication in VU Research Portalcitation for published version (APA)Schwaab, B. (2011). Credit Risk and State Space Methods. Thela Thesis / Tinbergen Institute.General rightsCopyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright ownersand it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights.            • Users may download and print one copy of any publication from the public portal for the purpose of private study or research.            • You may not further distribute the material or use it for any profit-making activity or commercial gain            • You may freely distribute the URL identifying the publication in the public portal ?Take down policyIf you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediatelyand investigate your claim.E-mail address:vuresearchportal.ub@vu.nlDownload date: 23. May. 2021Credit Risk and State Space MethodsCredit Risk and State Space Methods    Bernd SchwaabBernd SchwaabVrije Universiteit AmsterdamResearch SeriesCredit risk is the main risk in the banking book. As a result, time-varying credit risk conditions matter for intermediaries’ profitability, solvency,and overall financial stability. This dissertation studies various aspectsof joint credit and macro-financial conditions, in particular how theseinteract and lead to default clusters. Important sources of systematicdefault rate variation, such as contagion risk, the business cycle, the default cycle, shifts in credit supply, etc., are time varying and inherently unobserved. These time-varying factors are known to econometriciansas unobserved components. These components can be backed out from observed data using filtering and smoothing methods. This thesis consists of four main essays, each applying state space methods to a credit riskproblem at hand. As such, this thesis increases our understanding ofinterrelated credit and macro-financial conditions, in particular beforeand during financial crises such as the most recent one. Bernd Schwaab (1978) graduated cum laude from the Tinbergen Institute’s MPhil program in 2007 with a concentration in Econometrics and Finance. He started a PhD at Tinbergen Institute and VU University Amsterdam in the same year. As of August 2010 he has been working as a Research Economist at the European Central Bank, Financial Research Division.488

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