We evaluate the reliability of credit gap measures estimated over time samples of different lengths. We augment our empirical analysis (which turned out to be somewhat inconclusive) with Monte Carlo experiments. For this purpose we build an agent-based model that realistically reproduces credit...

We put forward a framework for measuring systemic risk and attributing it to individual banks. Systemic risk is measured as the expected loss to depositors and investors when a low-probability systemic event occurs. The risk contributions are calculated based on derivatives of the systemic risk...

The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustments (CVA's) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation framework for counterparty risk adjustments in presence of...

We consider the filtering model of Frey & Schmidt (2012) stated under the real probability measure and develop a method for estimating the parameters in this framework by using time-series data of CDS index spreads and classical maximum-likelihood algorithms. The estimation-approach incorporates...

We extend the model presented in Bonollo et al. by introducing a multiscenario framework that allows for a richer and more realistic specification, including non-static (stochastic) probabilities of default and losses given default. Though more complex from a computational point of view, the...

We put forward a Merton-type multi-factor portfolio model for assessing banks’ contributions to systemic risk. This model accounts for the major drivers of banks’ systemic relevance: size, default risk and correlation of banks’ assets as a proxy for interconnectedness. We measure systemic...

We put forward a Merton-type multi-factor portfolio model for assessing banks' contributions to systemic risk. This model accounts for the major drivers of banks' systemic relevance: size, default risk and correlation of banks' assets as a proxy for interconnectedness. We measure systemic risk...

After the recent financial crisis (2007-2010), many doubts on the reliability of the mathematical models to measure the financial risks have arisen. As a consequence, model risk has been a source of concern for financial regulators. This risk includes, among others, incorrect mathematical...

German municipalities are expected to suffer from (often significant) population losses in the upcoming decades. We assess these local governments' vulnerability to the fiscal consequences of this demographic decline through two means (using a sample of 1021 municipalities in the state of...