The level of capital requirement generated by the IRB approach depends crucially on the asset correlation, a parameter that enters the regulatory risk weight formula and is determined by the Regulators. Several studies have estimated the asset correlations and found that the empirical values are...

We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general eligible assets, including defaultable bonds. Since the...

Recent crises in the financial industry have shown weaknesses in the modeling of Risk-Weighted Assets (RWAs). Relatively minor model changes may lead to substantial changes in the RWA numbers. Similar problems are encountered in the Value-at-Risk (VaR)-aggregation of risks. In this article, we...