FRM: Basel interior scores-based (IRB) hazard weight function

Basel’s IRB determines a capital demand (K) = Credit score Value at Chance (CVaR) @ ninety nine.nine% – Envisioned Reduction (UL). This function is estimating an sudden decline (UL). For additional financial hazard movies, go to our internet site!

12 thoughts on “FRM: Basel interior scores-based (IRB) hazard weight function

  1. I was seeking for good literature about CVaR and i have to say, that this lecture helped me alot understand better how do calculate the CVaR. Thank you very much.

  2. I agree with Minh Bui, the formula that used to calculate capital requirement in Excel is not the same it shows on the K formula. The formula that is the same as the box should be =EAD*LGD*((NORMSDIST((NORMSINV(PD)+rho^0.5*NORMSINV(CL))/(1-rho)^0.5))-PD)*MaturityAdj. But they have the same result. Thanks so much for the lecture, it is so helpful to understand this subject! 

  3. Wzorki do excela dla polaków ;):Unexpectedloss =((B3*((ROZKŁAD.NORMALNY.S(((1/(1-B8))^0,5*ROZKŁAD.NORMALNY.S.ODW(B2)+(B8/(1-B8))^0,5*ROZKŁAD.NORMALNY.S.ODW(B10)))))-B2*B3)*B11)*B4, Maturity =(1+(B5-2,5)*((0,11852-0,05478*LN(B2))^2))/(1-1,5*((0,11852-0,05478*LN(B2))^2)) Jeżeli pd-B2,lgd-B3,ead-B4,m-B5, itp. Jeżeli potraficie to tak skrócić jak na filmiku to piszcie 😉

  4. I doubt it (as the excel XLS has survived several FRM seasons). More likely i think is simply that the formula itself is a non-trivial copula. But if you want to share the specific discrepancy, i can try to address it, thanks,

  5. actually I was wrong about what I said above. btw I still think you are not right about the Maturity Adjustment

    and for people, b(PD)=[ (0.11852-0.05478*ln(PD) ]^2

    I think for the Maturity Adjustment, the top should be 1+(M-2.5)*b(PD)

  6. I have a trouble of seeing the similarity between the function you wrote and the excel calculation when you highlighted it. Is that a mistake of calculation from you?

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