Cast: Callini Matteo, Delera Giacomo.
Video Editor: Vinci Emiliano.

Description: The set of international banking regulations requires banks to maintain a minimum capital reserve to guard against potential future losses. Credit capital requirements in Internal Rating Based approaches require the calibration of two key parameters: the probability of default and the loss-given-default. In this project, we applied the Vasicek model to a homogeneous portfolio to measure credit risk, examine parameter errors, and assess each parameter’s uncertainty impact on capital requirements. We compared the IRB simplified model with other stressed models using the Monte Carlo approach to simulate the parameters and analyze their effect on regulatory capital. We conducted statistical tests on Gaussian assumptions and explored different distributions. Both asymptotic and finite homogeneous portfolios were considered to evaluate the differences in regulatory capital requirements, and we also compared the results with the Standard model.

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