Economic Capital Allocation for Corporate Borrowers Credit Risk Coverage

Authors

DOI:

https://doi.org/10.21638/11701/spbu31.2021.02

Abstract

Both the estimation of economic capital for bank's credit risk coverage, and the allocation of economic capital by sources in order to determine the contribution of individual elements to total credit risk play an important role in the area of risk management of a bank. The estimation of a bank's economic capital for credit risk coverage serves as a starting point in the management of a bank's credit risk, while the allocation of economic capital to cover credit risk among individual elements allows to answer the question of how individual elements contribute to the total credit risk of a bank, which makes it possible to take certain decisions on credit risk management based on the obtained results of allocation. Nowadays, there are various theoretical methods and approaches to solve this nontrivial issue. The authors of the article attempted to implement them in practice, to estimate economic capital for credit risk coverage of a commercial bank and to allocate it among elements. This problem was solved applying the Euler allocation method and kernel regression.

Keywords:

economic capital, allocation, credit risk, corporate borrowers

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Published

2021-10-30

How to Cite

Berezinets, I. V., & Loginova, A. S. (2021). Economic Capital Allocation for Corporate Borrowers Credit Risk Coverage. Contributions to Game Theory and Management, 14, 20–37. https://doi.org/10.21638/11701/spbu31.2021.02

Issue

Vol. 14 (2021)

Section

Articles

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Articles of "Contributions to Game Theory and Management" are open access distributed under the terms of the License Agreement with Saint Petersburg State University, which permits to the authors unrestricted distribution and self-archiving free of charge.

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