A SECURITIZED POOL OF OPERATING LEASE ASSETS AND ITS RESIDUAL VALUE RISK EVALUATION
https://doi.org/10.26794/2587-5671-2014-0-3-127-138
Abstract
Leasing has proved itself as a powerful and effective area for the investment development of individual enterprises and industries. The competition in the market of lease services encourages leasing companies to expand the lease product range and seek alternative sources of financing lease transactions, of which securitization may become a promising tool. After the transition of the Russian banking system to international standards of capital calculation in the framework of Basel II and Basel III agreements, operations of lease assets securitization will have to meet the capital reservation requirements. Accordingly, the introduction of new standards makes it necessary to analyze their possible impact on the securitization attractiveness to the lessors. By an example of the default data of the securitized Volkswagen pool of operating lease assets the current research proves that the Basel committee’s methodology for the capital requirements definition is excessively conservative in respect of the residual value risk. Current foreign investigations into the subject also consistently express the viewpoint that the leasing industry is characterized by rather high recovery rates. This article proposes a new author’s approach to the residual value risk evaluation modifying the Basel methodology in respect of forming capital requirements upon lease assets securitization. The author’s model has been tested on a Volkswagen securitization transaction. The considered approach is based on the Gumbel copula model.
References
1. Gazman V.D. Leasing: Financing and Securitization. Moscow: NRU HSE Publishing House, 2011, 469 pp. (in Russian).
2. Gazman V.D. A Study of the Russian Leasing Market Dynamics: Results of the 14th Annual Survey of the Russian Leasing Market // Leasing Review, 2012. no. 2, pp. 8–20 (in Russian).
3. Gazman V.D. The Findings of the 15th Annual Research Project «Russian Leasing — 2012». Moscow: NRU HSE, 2013, 43 pp. (in Russian).
4. Gazman V.D. Lease Asset Securitization // Economicheskiy Zhurnal VShE (The HSE Economic Jopurnal), 2010, no. 3, pp. 349– 378 (in Russian).
5. De Laurentis G., Geranio M. Leasing Recovery Rates. Leaseurope — Bocconi University Business School Research Paper, 2001, pp. 1–28.
6. Schmit M., Stuyck J. Recovery Rates in the Leasing Industry. Working paper presented at Leaseurope’s Annual Working Meeting, 2002, pp. 1–13.
7. Laurent M.— P., Schmit M., Van Belle S.C. An Empirical Approach to Residual Value Risk Estimation in Automotive Leases. Managerial Finance, 2009, vol. 35, no 10, pp. 874–884.
8. Laurent M. — P., Schmit M. Estimating «Distressed» Lgd on Defaulted Exposures: a Portfolio Model Applied to Leasing Contracts (in the book of Resti A., Sironi A., Altman E. Recovery Risk: The next Challenge in Credit Risk Management, Risk Books and Journals, 2005, 364 p.
9. Pirotte H., Vaessen C. Residual Value Risk in the Leasing Industry: A European Case. // The Journal of Futures Markets The European Journal of Finance, 2008, vol. 14, no 2, pp. 157–177.
10. Fleming M. Calculation of Risk Weights for Residual Value Purposes International Convergence of Capital Measurements and Capital Standards, Paragraph 524. Equipment Leasing Association, 2005, pp. 1–5.
11. Baer H.P. Asset Securitization. Moscow: Wolters Kluwer, 2007, 624 p. 12. Sklar A. Fonctions de Repartition a n Dimensions et Leurs Marges. Publication Institutionnelles Statistiques Université Paris, 1959, pp. 229–231.
12. Rösch D., Scheule H. Capital Incentives and Adequacy for Securitizations. // Journal of Banking & Finance, 2011, no. 36, pp. 733– 748.
13. Meneguzzo D., Vecchiato W. Copula Sensitivity in Collateralized Debt Obligations and Basket Default Swaps. // The Journal of Futures Markets, 2004, vol. 24, no 1, pp. 37–70.
14. Rousseau M. Copula Functions: a Semi-Parametric Approach to the Pricing of Basket Credit Derivatives. Ecole Centrale Paris — France — National University of Singapore, 2007, pp. 1–96.
15. Prado S. Hedging Residual Value Risk Using Derivatives. Working Paper 2009–31 of Université Université de Paris Ouest Nanterre La Défense, 2008, pp. 1–45.
16. Frees E., Valdez E. Understanding Relationships Using Copulas. // North American Actuarial Journal, 1998, vol. 2, no 1, pp. 1–25.
17. Tang A., Valdez E. Economic Capital and the Aggregation of Risks using Copulas, 2006, pp. 1–29.
18. Ane Th., Kharoubi C. Dependence Structure and Risk Measure. // Journal of Business, 2003, vol. 76, no 3, pp. 411–438.
19. C. Copula-Based Top-Down Approaches in Financial Risk Aggregation. Working Paper Series by the University of Applied Sciences of bfi Vienna, 2006, pp. 3–78.
20. Kole E., Koedijk K., Verbeek M. Selecting Copulas for Risk Management. // Journal of Banking & Finance, 2006, no 3. pp. 2405– 2423.
21. Rosenberg J., Schuermann T.A. A General Approach to Integrated Risk Management with Skewed, Fat-Tailed Risks. // Journal of Financial Economics, 2006, no 79, pp. 569– 613.
22. Morone M., Cornaglia A., Mignola G. Economic Capital Assessment via Copulas: Aggregation and Allocation of Different Risk Types. 2007, pp. 1–20.
23. Jouanin J.-F., Ribouler G., Roncalli Th. Financial Applications of Copula Functions (in the book of Szego G. Risk Measures for the 21st Century, John Wiley & Sons, 2004, 512 p.).
24. Penikas G.I. Copula Models in the Bank’s Forex Risk Management // Prikladnaya Econometrika (Journal of Applied Econometrics), 2010, no. 1 (17), pp. 62–87.
25. Penikas G.I., Simakova V.B. The Interest Rate Risk Management Based on copulaGARCH models // Prikladnaya Econometrika (Journal of Applied Econometrics), 2009. no. 1 (13), pp. 3–36.
26. Penikas G.I. Copula Models as Applied to Finance Problems //Zhurnal Novoi Economicheskoi Assotsiatsii (Journal of the New Economic Association), 2010, no. 7, pp. 24–44.
27. Aleskerov F.T., Andrievskaya I.K., Penikas G.I., Solodkov V.M. Analysis of Basel II Mathematical Models. Fizmatlit Publishers, Moscow, 2010, 288 p. (in Russian).
28. Gumbel E.J. Bivariate exponential distributions // Journal of the American Statistical Association, 1960, no. 55, pp. 698–707.
Review
For citations:
Petrova E.A. A SECURITIZED POOL OF OPERATING LEASE ASSETS AND ITS RESIDUAL VALUE RISK EVALUATION. Finance: Theory and Practice. 2014;(3):127-138. (In Russ.) https://doi.org/10.26794/2587-5671-2014-0-3-127-138
Views:
598
Email this article 