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The term Advanced IRB or A-IRB is an abbreviation of advanced internal ratings-based approach, and it refers to a set of credit risk measurement techniques proposed under Basel II capital adequacy rules for banking institutions. Under this approach the banks are allowed to develop their own empirical model to quantify required capital for credit risk. Banks can use this approach only subject to approval from their local regulators. For more background on the types of models banks have applied, see the Jarrow-Turnbull model. Under A-IRB banks are supposed to use their own quantitative models to estimate PD (probability of default), EAD (exposure at default), LGD (loss given default) and other parameters required for calculating the RWA (risk-weighted asset). Then total required capital is calculated as a fixed percentage of the estimated RWA. ==Some formulae in internal-ratings-based approach== Some credit assessments in standardised approach refer to unrated assessment. Basel II also encourages banks to initiate internal ratings-based approach for measuring credit risks. Banks are expected to be more capable of adopting more sophisticated techniques in credit risk management. Banks can determine their own estimation for some components of risk measure: the probability of default (PD), loss given default (LGD), exposure at default (EAD) and effective maturity (M). For public companies, default probabilities are commonly estimated using either the structural model of credit risk proposed by Robert Merton (1974) or reduced form models like the Jarrow-Turnbull model. For retail and unlisted company exposures, default probabilities are estimated using credit scoring or logistic regression, both of which are closely linked to the reduced form approach. The goal is to define risk weights by determining the cut-off points between and within areas of the expected loss (EL) and the unexpected loss (UL), where the regulatory capital should be held, in the probability of default. Then, the risk weights for individual exposures are calculated based on the function provided by Basel II. File:UnexpectLoss.jpg Below are the formulae for some banks’ major products: corporate, small-medium enterprise (SME), residential mortgage and qualifying revolving retail exposure. S being Min(Max(Sales Turnover,5),50 ) In the formulas below, * N(x) denotes the normal cumulative distribution function * G(z) denotes the inverse cumulative distribution function * PD is the probability of default * LGD is the loss given default * EAD is the exposure at default * M is the effective maturity 抄文引用元・出典: フリー百科事典『 ウィキペディア（Wikipedia）』 ■ウィキペディアで「Advanced IRB」の詳細全文を読む スポンサード リンク
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