Credit Risk Management in the Automotive Industry

Transcription

1 Alexander Hener Credit Risk Management in the Automotive Industry Structuring of loan and lease securitizations as integrative solution With a foreword by Prof. Dr. Johannes Schneider Deutscher Universitats-Verlag

2 Contents 1 Introduction 1 2 The Automotive Industry Relevance of the Industry and of the Captive Financial Companies Risk Management in Industry and Commerce Risks and Risk Management in Banking Risks in Industry and Commerce Risk Management in Industry and Commerce Risks and Risk Management in the Automotive Industry Stakeholders in the Automotive Industry Classical Stakeholders and Captive Finance Companies The Regulator as Additional Stakeholder Conflict of Interest Summary 21 3 Credit Risk Models Model Requirements in the Automotive Industry Types of Products in Car Financing and Leasing Credit Portfolios in the Automotive Industry Data Availability, Empirical and Modeling Requirements Elements of Credit Risk Modeling Conceptional Issues 30

3 Xll Parameter Specification Backtesting and Alternatives for Validation Implications for the Automotive Industry Model Selection Short History of Credit Risk Models Classification of Credit Risk Models Comparability and Mixtures of Models Applicability of Model Types to Auto Portfolios Implementations of CR CreditRisk+ and the Regulatory Model The Original CreditRisk+Model Introduction and Survey Data Requirements Framework of CreditRisk Probability Generating Functions Assumption I: Default independence conditional on individual default rates Assumption II: Approximation of probability generating function Assumption III: Functional form of the individual default rates Idiosyncratic Sectors Assumption IV : Independent gamma distributions of sector default rates Assumption V : Rounding and standardizing of exposures Computation of the Unconditional Loss Distribution Implied Dependency Structure Discussion Extensions of CreditRisk Incorporation of Rating Migrations Default and Loss Correlations 54

4 Xlll 4.4 Implementation of CreditRisk Determination of Loss Distribution Further Issues The Regulatory Model 67 5 Credit Risk Management Risk Measures and Contributions Portfolio Risk Measures Examples for Portfolio Risk Measures Risk Contributions Portfolio Risk Measures and Contributions in CreditRisk Portfolio Risk Measures Risk Contributions 78 6 A Model for Securitization Capital and the Management of Financial Institutions Capital Views on Capital at Financial Institutions Securitization Introduction Proceedings, Classifications, and Structures of Securitization Motivation for Securitizations Excursion: Moody's Approach to Asset-backed Securities Securitization in the Automotive Industry Issuer's View Investors's View Securitization Example: DC Auto Trust 2002-C Employment of Credit Derivatives A Model for the Securitization of Car Financing Contracts 106

5 XIV General Setting Short Survey of Objectives Objective 1: Minimizing Regulatory Capital Ill Objective 2: Regulatory Capital Arbitrage Objective 3: Optimization of RoE and RoRaC Alternative Problem Formulations Extensions of the Model Regulatory Framework Alignment of the Model in the Regulatory Framework Inputs for the Calculation of Regulatory Capital for Securitized Loans The Supervisory Formula Approach SFA Empirical Analysis Implementation Model Choice, Parameterization and Implementation Implementation of Framework and Problems Simulation of Loss Distribution Data Information and Manipulations Loss Rate Information Default Rate Information Borrower Information Results Loss Distribution and Risk Contributions Optimization Results Conclusion Summary and Topics for Future Research 145 Appendix: Explicit Calculations for the CR+ Model 149

6 XV Appendix: Abbreviations 153 Appendix: Variables 155 Bibliography 157