Dynamic Model of Losses of a Creditor with a Large Mortgage Portfolio

• Other Authors: Hội thảo quốc tế Ngân hàng và Tài chính thế giới 2015
• Format: Conference or Workshop Item
• Language: English
• Published: Trường Đại học Kinh tế 2020
• Subjects: Credit risk; Mortgage; Loan portfolio; Dynamic model; Estimation
• Online Access: http://repository.vnu.edu.vn/handle/VNU_123/97701
• Institution: Vietnam National University, Hanoi

We propose a dynamic model of mortgage credit losses, which is a generalization of the wellknown Vasicek's model of loss distribution. We assume borrowers hold assets covering the instalments and own real estate which serves as collateral. Both the value of the assets and the price of the estate follow general stochastic processes driven by common and individual factors. We describe the correspondence between the common factors and the percentage of defaults, and the loss given default, respectively, and we suggest a procedure of econometric estimation in the model. On an empirical dataset we show that a more accurate estimation of common factors can lead to savings in capital needed to hold against a quantile loss