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Asian Review of Financial Research, Vol., No..
pp.125~143
pp.125~143
Korean Housing Cycle : its Implications for Risk Management (Factor-augmented VAR Approach)
Myeong-Hyeon Kim Korea Housing & Urban Guarantee Corporation (KHUG), BIFC40, Busan, Republic of Korea
Doo Won Bang Korea Housing & Urban Guarantee Corporation (KHUG)
Jung Ha Kim Korea Housing & Urban Guarantee Corporation (KHUG)
This paper proposes an integrated risk management framework that includes 1) measuring risk of credit portfolios, 2) implementing (macro) stress-test, and 3) setting risk limits by using the estimated systematic latent factor specific to capture the housing market cycle. To this end, we extract information from a set of real-estate market variables based on the FAVAR methodology proposed by Bernanke, Boivin and Eliasz (2005). Then, we show how to apply the estimated systematic factor to the risk management specific to the housing market in an integrated way within the Vasicek one-factor credit model. Our proposed methodology is very fitted to analyze risk of slow-moving and low-defaultable capitals such as alternative investments.
Myeong-Hyeon Kim
Doo Won Bang
Jung Ha Kim
This paper proposes an integrated risk management framework that includes 1) measuring risk of credit portfolios, 2) implementing (macro) stress-test, and 3) setting risk limits by using the estimated systematic latent factor specific to capture the housing market cycle. To this end, we extract information from a set of real-estate market variables based on the FAVAR methodology proposed by Bernanke, Boivin and Eliasz (2005). Then, we show how to apply the estimated systematic factor to the risk management specific to the housing market in an integrated way within the Vasicek one-factor credit model. Our proposed methodology is very fitted to analyze risk of slow-moving and low-defaultable capitals such as alternative investments.