As international financial integration gathers pace, interconnectivity has increased tremendously among financial institutions, financial markets and financial systems, a phenomenon to which the recent global financial crisis perhaps provided the best testimony. The interconnectivity among...

Internal risk management models and downside-risk measures such as Value-at-Risk (VaR) play an important role in contemporary banking practice. VaR measures the maximum loss born by a bank or other financial institution over a certain time period and given a certain level of confidence....

This paper assesses systemic linkages among banks in Hong Kong using the risk measure "CoVaR" derived from quantile regression. The CoVaR measure captures the co-movements of banks¡¯ default risk by taking into account their nonlinear relationship when the banks are in distress. Based on...

We derive the exact loss distribution for portfolios of bonds or cor-porate loans when the number of risks grows indefinitely. We show that in many cases this distribution lies in the maximal domain of attraction of the Weibull (Type III) limit law. Knowledge of the dis-tribution and its tail...

Many financial time-series show leptokurtic behavior, i.e., fat tails. Such tail behavior is important for risk management. In this paper I focus on the calculation of Value-at-Risk (VaR) as a downside-risk measure for optimal asset portfolios. Using a framework centered around the Student t...

This paper estimates macroeconomic credit risk of banks¡¦ loan portfolio based on a class of mixture vector autoregressive models. Such class of models can differentiate distributions of default rates and macroeconomic conditions for different market situations and can capture their dynamics...