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Measuring the Covariance Risk of Consumer Debt Portfolios

Carlos Madeira

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: Consumer loan risk is hard to predict, since households are heterogeneous and suffer significant macro shocks. This work proposes a heterogeneous agents model of household credit risk with shocks to both labor income and credit access. Using the Chilean Household Finance Survey I simulate the default conditions of different households over distinct macro scenarios. I show that banks' loan portfolios have very different covariance risk in relation to macro events, with some banks being prone to high risk during recessions. Also, heterogeneity in covariance risk has a negative impact on loan amounts and the probability of receiving a loan.

Date: 2016-11
New Economics Papers: this item is included in nep-rmg
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Citations: View citations in EconPapers (3)

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https://www.bcentral.cl/documents/33528/133326/DTBC_793.pdf (application/pdf)

Related works:
Journal Article: Measuring the covariance risk of consumer debt portfolios (2019) Downloads
Working Paper: Measuring the Covariance Risk of Consumer Debt Portfolios (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:793

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