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  1. 1 Ekonomický časopis (Journal of Economics)

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  1. 1 2013

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  1. 1 Witzany J.

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NOTE ON THE VASICEK’S MODEL WITH THE LOGISTIC DISTRIBUTION

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Witzany J.
Ekonomický časopis (Journal of Economics)
|
2013
|
vol. 61
|
issue 10
1053 – 1066
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.
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