Risk capital is the contribution of an exposure to the default risk of a financial institution. We investigate its relationship with required shareholder returns, showing that the use of return on risk capital (RAROC) as a risk-adjusted performance measure is inconsistent with the standard...

In recent years, credit risk has played a key role in risk management issues. Practitioners, academics and regulators have been fully involved in the process of developing, studying and analyzing credit risk models in order to find the elements which characterize a sound risk management system....

During the last two years, credit risk has been playing a key role in risk management issues. Practitioners, academics and regulators have been fully involved in the process of developing, studying and analysing credit risk models in order to find the elements, which characterize a sound risk...

This paper investigates the effect of including the customer loan approval process to the estimation of loan performance and explores the influence of sample selection bias in predicting the probability of default. The bootstrap variable reduction technique is applied to reduce the variable...

Building an unbalanced panel of United States (US) bank holding company (BHC) and commercial bank balance sheet data from 1986 to 2006, we examine the relationship between short-term capital buffer and portfolio risk adjustments. Our estimations indicate that the relationship over the sample...

The objective of this paper is to determine whether information from equity markets, as summarized in the distance to default measure derived from Merton-MKMV, is useful for modeling and predicting bank credit ratings. We use the BankScope database and Bloomberg to build a data set comprising of...