NOTE ON THE VASICEK’S MODEL WITH THE LOGISTIC DISTRIBUTION

• Authors: Witzany Jiří
• Languages of publication: EN

Abstracts

EN

The paper argues that it would be natural to replace the standard normal distribution function by the logistic function in the regulatory Basel II (Vasicek’s) formula. In fact, such a model would be consistent with the standard logistic regression probability of default modelling approach. An empirical study based on the US commercial bank’s loan historical delinquency rates from the period 1985 – 2012 re-estimates the default correlations and unexpected losses for the normal and logistic distribution models. The results indicate that the capital requirements could be up to 100% higher if the normal Vasicek’s model was replaced by the logistic one.

Keywords

EN

CREDIT RISK; BASEL II REGULATION; DEFAULT RATES; VASICEK’S MODEL

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2013
• Volume: 61
• Issue: 10
• Pages: 1053 – 1066

Contributors

author

Witzany Jiří

• Ekonomická Univerzita v Praze, Fakulta financií a účetnictví, nám. Winstona Churchilla 4, Praha 3, Czech Republic