We investigate whether banks actively manage their exposure to interest rate risk in the short run. Using bank-level data of German banks for the period 2011Q4- 2017Q2, we find evidence that banks actively manage their interest rate risk exposure in their banking books: They take account of...

Using unique data of a survey among small and medium-sized German banks, we analyze various aspects of risk management. We especially analyze the effect of a 200-bp increase in the interest level. We find that banks seem to reduce the volatility of their net interest margin by exposing...

To study bank behavior, we use tail events in the history of a bank's credit losses as a new type of shock to capital. When defined appropriately, such events are virtually unpredictable for bank managers and spread evenly over time and banks. We estimate from granular data of all German banks...

Over the past few years the CDS market’s role has evolved from mostly providing default protection towards credit risk trading. The first-ever credit event in a developed country’s sovereign CDS has further highlighted the importance of the CDS market from a macro-prudential perspective....

Using a unique data set on German banks' sector specific loan exposures to the real economy and the corresponding write-offs and write-downs, we examine the impact of loan portfolio sector concentration on credit risk. By controlling for common risk factors, we separate the bank-specific...

Using a unique data set on German banks' loans to the German real economy, we investigate banks' credit risk. This data set includes the volume of loans per bank and industry as well as the corresponding write-downs. Our empirical study for the period 2003-2011 yields the following results: (i)...

Using unique data sets on German banks, we decompose their net interest margin and quantify the different components by estimating the costs of the various functions they perform. We investigate three major functions: namely, liquidity and payment management for the customers, the bearing of...

This paper investigates contagion at the German interbank market under the assumption of a stochastic loss given default (LGD). We combine a unique data set about the LGD of interbank loans with data about interbank exposures. We find that the frequency distribution of the LGD is u-shaped. Under...