regular core capital requirement that helps deter excessive risk-taking incentives. The second tier, a novel aspect of our … framework, is a special capital account that limits risk taking but preserves creditors' monitoring incentives. -- capital … requirements ; leverage ; systemic risk …

The goal of integrated risk management in a financial institution is to measure and manage risk and capital across a … range of diverse business activities. This requires an approach for aggregating risk types (market, credit, and operational …) whose distributional shapes vary considerably. In this paper, we use the method of copulas to construct the joint risk …

Credit migration matrices are cardinal inputs to many risk management applications. Their accurate estimation is … bootstrap techniques. The method can have substantial economic import: economic credit risk capital differences between economic …

mindful of how undercapitalization can create incentives to take on excessive risk. This study proposes a novel framework for … capital regulation that addresses banks' incentives to take on excessive risk and leverage. The framework consists of a … design, this special account thus limits risk taking, but ensures that creditors' disciplining incentives are preserved. …

In theory the potential for credit risk diversification for banks could be substantial. Portfolio diversification is … driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the … degree of dependence individual firms have to the different types of risk factors. We propose a model for exploring these …

This paper considers a simple model of credit risk and derives the limit distribution of losses under different … assumptions regarding the structure of systematic risk and the nature of exposure or firm heterogeneity. We derive fat …-tailed correlated loss distributions arising from Gaussian risk factors and explore the potential for risk diversification. Where …

risk factors are correlated with each other and the degree of dependence individual firms have to the different types of … risk factors. Using a global vector autoregressive macroeconometric model accounting for about 80% of world output, we … propose a model for exploring credit risk diversification across industry sectors and across different countries or regions …

We develop a framework for modeling conditional loss distributions through the introduction of risk factor dynamics …