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Papers by Thilo Liebig

Research paper thumbnail of Forecasting Credit Portfolio Risk

Discussion Paper Series 2 Banking and Financial Studies, Feb 1, 2004

Research paper thumbnail of Vergleich verschiedener Ansätze zur Modellierung von Assetkorrelationen

Research paper thumbnail of Assetkorrelationen der Schlüsselbranchen in Deutschland

Research paper thumbnail of Benchmarking Asset Correlations

Research paper thumbnail of Dynamic Modeling of Credit Portfolio Risk with Time-Discrete Hazard Rates

Research paper thumbnail of Forecasting Credit Portfolio Risk

The main challenge of forecasting credit default risk in loan portfolios is forecasting the defau... more The main challenge of forecasting credit default risk in loan portfolios is forecasting the default probabilities and the default correlations. We derive a Merton-style threshold-value model for the default probability which treats the asset value of a firm as unknown and uses a factor model instead. In addition, we demonstrate how default correlations can be easily modeled. The empirical analysis is based on a large data set of German firms provided by Deutsche Bundesbank. We find that the inclusion of variables which are correlated with the business cycle improves the forecasts of default probabilities. Asset and default correlations depend on the factors used to model default probabilities. The better the point-in-time calibration of the estimated default probabilities, the smaller the estimated correlations. Thus, correlations and default probabilities should always be estimated simultaneously.

Research paper thumbnail of Credit Risk Factor Modeling and the Basel II IRB Approach

Default probabilities (PDs) and correlations play a crucial role in the New Basel Capital Accord.... more Default probabilities (PDs) and correlations play a crucial role in the New Basel Capital Accord. In commercial credit risk models they are an important constituent. Yet, modeling and estimation of PDs and correlations is still under active discussion. We show how the Basel II one factor model which is used to calibrate risk weights can be extended to a model for estimating PDs and correlations. The important advantage of this model is that it uses actual information about the point in time of the credit cycle. Thus, uncertainties about the parameters which are needed for Value-at-Risk calculations in portfolio models may be substantially reduced. First empirical evidence for the appropriateness of the models and underlying risk factors is given with S&P data.

Research paper thumbnail of Basel II and Bank Lending to Emerging Markets: Micro Evidence from German Banks

This paper investigates whether the new Basel Accord will induce a change in bank lending to emer... more This paper investigates whether the new Basel Accord will induce a change in bank lending to emerging markets using a new loan level data set on German banks' foreign exposure. We test two interlinked hypotheses on the conditions under which the change in the regulatory capital would leave lending flows unaffected. This would be the case if (i) the new

Research paper thumbnail of Incorporating prediction and estimation risk in point-in-time credit portfolio models

In this paper we focus on the analysis of the effect of prediction and estimation risk on the los... more In this paper we focus on the analysis of the effect of prediction and estimation risk on the loss distribution, risk measures and economic capital. When variables for the determination of probability of default and loss distribution have to be predicted because they are not available at the time the prediction is made, the prediction is prone to errors. The model parameters for the estimation of probability of default or asset correlation are not available, and usually have to be estimated using historical data. The incorporation of prediction and estimation risk generally leads to broader loss distributions and therefore to rising values of risk parameters such as Value at Risk or Expected Shortfall. The level of economic capital required may be strongly underestimated if prediction and estimation risk are ignored.

Research paper thumbnail of Forecasting Credit Event Frequency – Empirical Evidence for West German Firms

Research paper thumbnail of Multiyear Risk of Credit Losses in SME Portfolios

Research paper thumbnail of How will Basel II Affect Bank Lending to Emerging Markets? An Analysis Based on German Bank Level Data

SSRN Electronic Journal, 2000

... 7 - 16 See appendix for the sources of the data. 17 See Nestmann et. al. ... While we recogni... more ... 7 - 16 See appendix for the sources of the data. 17 See Nestmann et. al. ... While we recognise that Euro exchange rates against other currencies may be relevant, it should be noted that exposures in Euro and US$ are predominant for German bank lending (see Nestmann et. al. ...

Research paper thumbnail of Basel II and bank lending to emerging markets: Evidence from the German banking sector

Journal of Banking & Finance, 2007

Research paper thumbnail of Systematic risk of CDOs and CDO arbitrage

Page 1. Systematic risk of CDOs and CDO arbitrage Alfred Hamerle (University of Regensburg) Thilo... more Page 1. Systematic risk of CDOs and CDO arbitrage Alfred Hamerle (University of Regensburg) Thilo Liebig (Deutsche Bundesbank) Hans-Jochen Schropp (University of Regensburg) Discussion Paper Series 2: Banking and Financial Studies No 13/2009 ...

Research paper thumbnail of Optimal greedy policies for stochastic control models

Mathematical Methods of Operations Research, 1996

Research paper thumbnail of Forecasting Credit Portfolio Risk

Discussion Paper Series 2 Banking and Financial Studies, Feb 1, 2004

Research paper thumbnail of Vergleich verschiedener Ansätze zur Modellierung von Assetkorrelationen

Research paper thumbnail of Assetkorrelationen der Schlüsselbranchen in Deutschland

Research paper thumbnail of Benchmarking Asset Correlations

Research paper thumbnail of Dynamic Modeling of Credit Portfolio Risk with Time-Discrete Hazard Rates

Research paper thumbnail of Forecasting Credit Portfolio Risk

The main challenge of forecasting credit default risk in loan portfolios is forecasting the defau... more The main challenge of forecasting credit default risk in loan portfolios is forecasting the default probabilities and the default correlations. We derive a Merton-style threshold-value model for the default probability which treats the asset value of a firm as unknown and uses a factor model instead. In addition, we demonstrate how default correlations can be easily modeled. The empirical analysis is based on a large data set of German firms provided by Deutsche Bundesbank. We find that the inclusion of variables which are correlated with the business cycle improves the forecasts of default probabilities. Asset and default correlations depend on the factors used to model default probabilities. The better the point-in-time calibration of the estimated default probabilities, the smaller the estimated correlations. Thus, correlations and default probabilities should always be estimated simultaneously.

Research paper thumbnail of Credit Risk Factor Modeling and the Basel II IRB Approach

Default probabilities (PDs) and correlations play a crucial role in the New Basel Capital Accord.... more Default probabilities (PDs) and correlations play a crucial role in the New Basel Capital Accord. In commercial credit risk models they are an important constituent. Yet, modeling and estimation of PDs and correlations is still under active discussion. We show how the Basel II one factor model which is used to calibrate risk weights can be extended to a model for estimating PDs and correlations. The important advantage of this model is that it uses actual information about the point in time of the credit cycle. Thus, uncertainties about the parameters which are needed for Value-at-Risk calculations in portfolio models may be substantially reduced. First empirical evidence for the appropriateness of the models and underlying risk factors is given with S&P data.

Research paper thumbnail of Basel II and Bank Lending to Emerging Markets: Micro Evidence from German Banks

This paper investigates whether the new Basel Accord will induce a change in bank lending to emer... more This paper investigates whether the new Basel Accord will induce a change in bank lending to emerging markets using a new loan level data set on German banks' foreign exposure. We test two interlinked hypotheses on the conditions under which the change in the regulatory capital would leave lending flows unaffected. This would be the case if (i) the new

Research paper thumbnail of Incorporating prediction and estimation risk in point-in-time credit portfolio models

In this paper we focus on the analysis of the effect of prediction and estimation risk on the los... more In this paper we focus on the analysis of the effect of prediction and estimation risk on the loss distribution, risk measures and economic capital. When variables for the determination of probability of default and loss distribution have to be predicted because they are not available at the time the prediction is made, the prediction is prone to errors. The model parameters for the estimation of probability of default or asset correlation are not available, and usually have to be estimated using historical data. The incorporation of prediction and estimation risk generally leads to broader loss distributions and therefore to rising values of risk parameters such as Value at Risk or Expected Shortfall. The level of economic capital required may be strongly underestimated if prediction and estimation risk are ignored.

Research paper thumbnail of Forecasting Credit Event Frequency – Empirical Evidence for West German Firms

Research paper thumbnail of Multiyear Risk of Credit Losses in SME Portfolios

Research paper thumbnail of How will Basel II Affect Bank Lending to Emerging Markets? An Analysis Based on German Bank Level Data

SSRN Electronic Journal, 2000

... 7 - 16 See appendix for the sources of the data. 17 See Nestmann et. al. ... While we recogni... more ... 7 - 16 See appendix for the sources of the data. 17 See Nestmann et. al. ... While we recognise that Euro exchange rates against other currencies may be relevant, it should be noted that exposures in Euro and US$ are predominant for German bank lending (see Nestmann et. al. ...

Research paper thumbnail of Basel II and bank lending to emerging markets: Evidence from the German banking sector

Journal of Banking & Finance, 2007

Research paper thumbnail of Systematic risk of CDOs and CDO arbitrage

Page 1. Systematic risk of CDOs and CDO arbitrage Alfred Hamerle (University of Regensburg) Thilo... more Page 1. Systematic risk of CDOs and CDO arbitrage Alfred Hamerle (University of Regensburg) Thilo Liebig (Deutsche Bundesbank) Hans-Jochen Schropp (University of Regensburg) Discussion Paper Series 2: Banking and Financial Studies No 13/2009 ...

Research paper thumbnail of Optimal greedy policies for stochastic control models

Mathematical Methods of Operations Research, 1996

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