Credit Contagion Risk in German Auto Loans
Abstract
In this paper, we investigate default clusters and reveal credit contagion risk in a data set containing more than 5 million German auto loans. We demonstrate that auto loan defaults cannot be attributed to loan-, borrower- and asset-specific variables and macroeconomic effects alone. Therefore, we explicitly model contagion effects and reveal that the default of one auto loan can lead to the defaults of other auto loans. Our results are highly relevant for banks’ risk management of auto loan portfolios as well as for rating agencies and regulators because they indicate that contagion effects should be considered when assessing credit risk.
Keywords
credit contagion; auto loans; default clustering; correlated default risk; loan default determinants
Cite as
Fenner, A., & Vollmar, S. (2023). Credit Contagion Risk in German Auto Loans. Journal of Credit Risk, 19(4).Details
Publication type
Research article (journal)
Peer reviewed
Yes
Publication status
Published
Year
2023
Journal
Journal of Credit Risk
Volume
19
Issue
4
Language
English
ISSN
1744-6619
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