Valuating consumer credit portfolios
This paper proposes a model that associates borrower credit risk with the cash flow method to assess the economic value of a consumer credit portfolio. A Monte Carlo simulation applying the method to an illustrative loan reveals that the lending standards of the institution, captured in the model by...
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| Format: | Article |
| Language: | English |
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Elsevier
2022-09-01
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| Series: | Latin American Journal of Central Banking |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2666143822000217 |
| _version_ | 1811274790241042432 |
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| author | Pedro Piccoli |
| author_facet | Pedro Piccoli |
| author_sort | Pedro Piccoli |
| collection | DOAJ |
| description | This paper proposes a model that associates borrower credit risk with the cash flow method to assess the economic value of a consumer credit portfolio. A Monte Carlo simulation applying the method to an illustrative loan reveals that the lending standards of the institution, captured in the model by the expected and unexpected losses of the contract according to Basel II Internal Rating-Based Approach, is a key driver of the portfolio's intrinsic value, lending support to the evidence that a bank's credit policy and a bank's valuation are associated. |
| first_indexed | 2024-04-12T23:25:07Z |
| format | Article |
| id | doaj.art-acee90e88dc747a2897e340e1b870e36 |
| institution | Directory Open Access Journal |
| issn | 2666-1438 |
| language | English |
| last_indexed | 2024-04-12T23:25:07Z |
| publishDate | 2022-09-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Latin American Journal of Central Banking |
| spelling | doaj.art-acee90e88dc747a2897e340e1b870e362022-12-22T03:12:25ZengElsevierLatin American Journal of Central Banking2666-14382022-09-0133100067Valuating consumer credit portfoliosPedro Piccoli0Pontifícia Universidade Católica do Paraná, BrazilThis paper proposes a model that associates borrower credit risk with the cash flow method to assess the economic value of a consumer credit portfolio. A Monte Carlo simulation applying the method to an illustrative loan reveals that the lending standards of the institution, captured in the model by the expected and unexpected losses of the contract according to Basel II Internal Rating-Based Approach, is a key driver of the portfolio's intrinsic value, lending support to the evidence that a bank's credit policy and a bank's valuation are associated.http://www.sciencedirect.com/science/article/pii/S2666143822000217G20G21E51 |
| spellingShingle | Pedro Piccoli Valuating consumer credit portfolios Latin American Journal of Central Banking G20 G21 E51 |
| title | Valuating consumer credit portfolios |
| title_full | Valuating consumer credit portfolios |
| title_fullStr | Valuating consumer credit portfolios |
| title_full_unstemmed | Valuating consumer credit portfolios |
| title_short | Valuating consumer credit portfolios |
| title_sort | valuating consumer credit portfolios |
| topic | G20 G21 E51 |
| url | http://www.sciencedirect.com/science/article/pii/S2666143822000217 |
| work_keys_str_mv | AT pedropiccoli valuatingconsumercreditportfolios |