Validation nightmare: the slotting approach under International Financial Reporting Standard 9

in Journal of Risk Model Validation (2021), 15(2), 63-100

This paper makes an important contribution to the practice of validation by focusing on an under-researched area of the slotting approach to real estate specialized lending under the International ... [more ▼]

This paper makes an important contribution to the practice of validation by focusing on an under-researched area of the slotting approach to real estate specialized lending under the International Financial Reporting Standard 9 (IFRS 9) framework. The paper introduces the concept of mapping the probability of default estimates to the slotting scores. A sequential process for deriving the correspondence between the slotting scores and probabilities of default of a particular obligor is proposed as a solution to adapting the slotting approach to the IFRS 9 rules. This solution is especially useful for capturing the increase in credit risk under the IFRS 9 rules using denotching and staging processes. All in all, this paper addresses the research questions of whether and how a slotting model can be used for IFRS 9 compliance purposes. In addition to the core aim of the paper, which is the provision of a probability of default mapping solution under the IFRS 9 framework, we also explain the methodology of a slotting model, discussing specific modeling choices for the real estate slotting approach aligned to the relevant regulatory framework. In doing so, we provide an example of a slotting model that can be used by practitioners as a challenger model during the validation exercise. [less ▲]

On strategically equivalent contests

Scientific Conference (2016, June 02)

Managerial collusive behavior with asymmetric incentive schemes Tacit collusion between relative profit maximizing managers

Scientific Conference (2015, May)

Optimal mix of funded and unfunded pension systems: The case of Luxembourg

Scientific Conference (2014, June 20)

An R-package for Finite Mixture Models

Scientific Conference (2013, December 07)

Managerial collusive behavior under asymmetric incentives

Scientific Conference (2013)

Delegation and Firms’ Ability to Collude: Do Incentive Schemes Matter?

in China-USA Business Review (2013)

Optimal mix of funded and unfunded pension systems: The case of Luxembourg

in Pensions (2012), 17(4), 208-222

Financing of the Luxembourg pension system is based on a pay-as-you-go (PAYG) system and hence on an intergenerational contract. As is the case for most other European countries, this system will be ... [more ▼]

Financing of the Luxembourg pension system is based on a pay-as-you-go (PAYG) system and hence on an intergenerational contract. As is the case for most other European countries, this system will be exposed to the effects of demographic ageing over the coming decades. The aim of this article is to develop a model that allows evaluating the effi ciency of a diversifi ed pension system fi nanced partly by a PAYG scheme and partly by capitalization. The efficiency is measured by the long-term sustainability of the system. We compare the sustainability of our model with the one of a pure PAYG system. [less ▲]

Analysis of the salary distribution in Luxembourg - a finite mixture approach

Scientific Conference (2011, December 11)

Strategic Delegation and Collusion: Do Incentive Schemes Matter?

E-print/Working paper (2011)