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Capital cyclicality, conditional coverage and long-term capital assessment

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Ferrer, Alex and Casals Carro, José and Sotoca López, Sonia (2015) Capital cyclicality, conditional coverage and long-term capital assessment. Finance Research Letters, 15 . pp. 246-256. ISSN 1544-6123

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Official URL: http://dx.doi.org/10.1016/j.frl.2015.10.009



Abstract

We address credit capital cyclicality from a different point of view with the objective of defining alternative measures of long-term capital solvency. We first define the conditional coverage vector, which results from keeping capital constant and let conditional coverage evolve with the economy. We show that its average equals the corresponding unconditional coverage, which motivates us to propose to use its minimum and standard deviation as long-term measures of solvency resilience and stability. We also conduct an empirical analysis. The results show the influence of the Great Recession on the conditional coverage vector and its long-term solvency discrimination power.


Item Type:Article
Uncontrolled Keywords:Capital assessment; Capital cyclicality; Charge-off; Conditional coverage; Credit risk; Unconditional capital
Subjects:Social sciences > Economics > Econometrics
ID Code:61062
Deposited On:23 Jun 2020 11:08
Last Modified:23 Jun 2020 11:08

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