Zastosowanie modeli czynnikowych w zarządzaniu portfelowym
The Use of Factor Models in Portfolio Credit Risk Management of Mortgage Backed Housing Loans and Cash Loans Portfolios

Summary/Abstract: Purpose: Within literature as well as in practice there is no one common standard of measuring portfolio credit risk of credit exposures toward retail clients. Therefore, the Article’s goal is to present the possibility of using for these purposes so called factor models. Approach: The article presents theoretical analysis of factor models’ properties and then is illustrating theirs usage basing on the data on mortgage backed housing loans and cash loans from one of the biggest credit institutions licensed in Poland. In the article techniques of stress testing analysis are being used as well. Findings: The significant differences in credit value at risk estimates indicate that parameters and assumptions of factor models have a critical role when we try to use this group of models. Additionally, the results suggest that it is necessary to use verification tools like stress tests or expert knowledge. Value: The article extends the literature findings in two aspects. First, it presents how to use factor models for retail loans portfolios and shows the results of CVaR estimates basing on empirical data. Second, it verifies the sensitivity of CVaR estimates to model selection and risk parameters.

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