Aspects of the impact of interest rate development
on the probability of default
Author:
Luminiţa Gabriela ISTRATE, Bogdan Ştefan IONESCU,
Monica HARALAMBIE
JEL:
E00, G20, G21, G32
DOI:
10.20869/AUDITF/2016/142/1149
Keywords:
Probability of default (PD), interest rate,
credit risk, financial institutions, interest rate risk
Abstract:
The acceptance of banking risks and their control is one
of the key moments in banking activity. Success in
banking management is possible only if the risks
accepted by banks are reasonable, can be controlled
and do not exceed the financial resources and their
expertise.
The occurrence of the interest rate risk is due to the
holding a portfolio of assets and liabilities with fixed
interest, different in terms of maturities and price and in
terms of ownership of assets and liabilities with variable
interest that adapts differently to interest rate
fluctuations.
The estimation of the probability of default is the first
step to determine and assess risk. The major issues in
the estimation of PD are generated by the limitation of
the required information.
This work captures the impact of interest rate on the PD
at maturity of loans. The analysis covers the period
January 2013 - December 2015 using data on interest
rates in the interbank market, the type of loans granted
and the number of people that recored outstanding
loans.
Abstract(180KB)
Article(531KB)