Using stock data that covers the period from 6th April 2001 to 17th June 2009, including data for the recent crisis period, we perform Value at Risk risk model validation by backtesting the performance of VaR models in predicting future losses of a portfolio of stocks, futures and options. The...

The new impairment reporting standards require banks to move from incurred loss models to sophisticated macroeconomic based expected credit loss models for current impairment estimation. While the impairments estimation is mainly focused on business as usual macroeconomic projections there is a...

The application of credit risk models in Comprehensive Capital Analysis and Review and European Banking Authority mandated regulatory macroeconomic stress testing is of significant concern for banks. The credit models that are used to project stressed losses and impairments under macroeconomic...

The financial crisis at the end of last decade has called for a comprehensive liquidity risk management framework. The challenge not only lies in finding appropriate liquidity risk measures but more importantly how to apply these measures to implement a risk based liquidity management. A core...

Liquidity risk is a risk of not being able to generate enough funds to meet the payment obligation. There has been a growing amount of literature on liquidity assessment and planning following the recent financial crisis. So far, not enough attention is given to the liquidity execution. At the...

In this paper we describe methods of decomposing risk into subcomponents such as contributing instruments, subportfolios or underlying risk factors e.g., equity, foreign exchange, economy-wide systematic and interest rate risk factors. The Euler allocation principle for allocation of instrument...

Portfolio risk measures such as Value at Risk is traditionally measured using a buy and hold assumption on the portfolio. In particular the 10-day market risk capital is commonly measured as the 1-day Value at Risk scaled by the square root of 10. While this scaling is convenient to obtain n-day...