This paper provides an empirical analysis of the risk of trading revenues of U.S. commercial banks. We collect … quarterly data on trading revenues, broken down by business line, as well as the Value at Risk-based market risk charge. The … across business lines. These low correlations do not corroborate systemic risk concerns. Neither is there evidence that the …

place greater weight on downside risk demand additional compensation for holding stocks with high sensitivities to downside … market movements. We show that the cross-section of stock returns reflects a premium for downside risk. Specifically, stocks … that covary strongly with the market when the market declines have high average returns. We estimate that the downside risk …

Value at Risk has become the standard measure of market risk employed by financial institutions for both internal and … methodologies developed so far give satisfactory solutions. Interpreting Value at Risk as a quantile of future portfolio values … assumptions invoked by existing methodologies (such as normality or i.i.d. returns). The Conditional Value at Risk or CAViaR model …

This paper examines how governance and risk management affect risk-taking in banks. It distinguishes between good risks … such a reward. A well-governed bank takes the amount of risk that maximizes shareholder wealth subject to constraints … cost effective to do so. The role of risk management in such a bank is not to reduce the bank's total risk per se. It is to …

We propose a new measure of time-varying tail risk that is directly estimable from the cross section of returns. We … exploit firm-level price crashes every month to identify common fluctuations in tail risk across stocks. Our tail measure is … significantly correlated with tail risk measures extracted from S&P 500 index options, but is available for a longer sample since it …

We propose a measure for systemic risk: CoVaR, the value at risk (VaR) of the financial system conditional on … institutions being under distress. We define an institution's contribution to systemic risk as the difference between CoVaR … leverage, size, and maturity mismatch predict systemic risk contribution. We also provide out of sample forecasts of a …

Over the last twenty years, the consensus view of systemic risk in the financial system that emerged in response to the … facing financial institutions. The dramatic rise of modern risk management has changed how the risks of financial … institutions are measured and how these institutions are managed. However, modern risk management is not without weaknesses that …

Systemic risk is commonly used to describe the possibility of a series of correlated defaults among financial … collapse of Long Term Capital Management in 1998, it has become clear that hedge funds are also involved in systemic risk … trading units that are organized much like hedge funds. As a result, the risk exposures of the hedge-fund industry may have a …

This paper studies asset pricing in a setting in which idiosyncratic risk in human capital is not fully insurable …, worker-firm relationships have endogenous durations owing to costly and unobservable effort. Uninsured tail risk in labor … earnings arises as a part of an optimal risk-sharing scheme. In the general equilibrium, exposure to the resulting tail risk …