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Banitaraf, Maryam | 2010

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 41012 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Zamani, Shiva
Abstract:
During the last years, a more volatile and dynamic financial environment has caused an increasing concern about the stability of banking systems. In this sense, it is widely agreed that credit risk is one of the variables that are more directly related to financial stability. One of the most important purposes of modeling credit risk, is estimating credit loss distribution and forecasting expected loss. In this research, we estimate and analysis credit loss by considering macroeconomic variables and latent factors. We express loans losses in terms of four stochastic components: default frequencies, the size of the loans portfolio, the exposures at default and the losses given default. Default frequencies and the size of the loans portfolio are expressed as functions of macroeconomic conditions as well as unobservable credit risk factors, which capture contagion effects between sectors. We apply our framework to the one of private bank in Iran, where we find that sectorial default frequencies are not only affected by economic cycles but also by a persistent latent factor.
Keywords:
Credit Risk ; Loan Portfolio ; Kalman Filters ; Latent Factors Test ; Loss Distribution ; Expected Loss

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