In this paper, we examine the behavior of stock prices of individual firms with different bond ratings surrounding the October market crash of 1987 and therefrom make inferences about the significance of bankruptcy costs borne by stockholders. The key findings are as follows: Immediately...

In attempting to promote international financial stability, the Basel Committee on Banking Supervision (2006) provided a framework that sought to control the amount of tail risk that large banks around the world would take in their trading books relative to their corresponding minimum capital...

Financial institutions suffered large trading losses during the 2007–2009 global financial crisis. These losses cast doubt on the effectiveness of regulations and risk management systems based on a single Value-at-Risk (VaR) constraint. While some researchers have recommended using Conditional...

In attempting to promote bank stability, the Basel Committee on Banking Supervision (2006) provides a framework that seeks to control the amount of tail risk that large banks take in their trading books. However, banks around the world suffered sizeable trading losses during the recent crisis....

In the aftermath of bank proprietary trading losses in the 2007–09 crisis, the Basel framework uses stressed Conditional Value-at-Risk to set minimum capital requirements for proprietary trading portfolios, whereas the Volcker rule restricts their composition in the US. With or without this...

In attempting to promote bank stability, the Basel Committee on Banking Supervision (2006) provides a framework that seeks to control the amount of tail risk that large banks take in their trading books. However, banks around the world suffered sizeable trading losses during the recent crisis....