In line with regulations and common risk management practice, the credit risk of a portfolio is managed via its … computations to exposure computations, firms find it expedient to compute these exposures under the risk neutral measure.Here we … show that exposures computed under the risk neutral measure are essentially arbitrary. They depend on the choice of …

When measuring market risk, credit institutions and Alternative Investment Fund Managers may deviate from equally … weighting historical data in their Value-at-Risk calculation and instead use an exponential time series weighting. The use of … exponential weighting in the Value-at-Risk calculation is very popular because it takes into account changes in market volatility …

risk and to detect macrofinancial problems has become a central concern. In the United States, this concern has been … Crises ; Macroprudential Risk ; Debt-Deflation Process ; Ponzi Finance …

Choosing a proper external risk measure is of great regulatory importance, as exemplified in the Basel II and Basel III … Accord which use Value-at-Risk (VaR) with scenario analysis as the risk measures for setting capital requirements. We argue a … good external risk measure should be robust with respect to model misspecification and small changes in the data. A new …

This paper presents a methodology to analyze the Value at Risk (VaR) backtesting probability values to detect the … risk that a subportfolio is exposed to in every trading day. The paper presets statistical methods to back test the number …-values using the run test. Finally a model is presented to decompose the subportfolios' P&L risk into systematic and idiosyncratic …

The article deals with the liquidity risk in the banks in the context of the financial crisis. At first, the balance … sheet and market liquidity are defined and the main principles of the methods for measuring liquidity risk, which banks use …

that time in general resilient to the default of large banks, i.e. did not exhibit substantial contagion risk. Even though …

) risk estimates with portfolio risk. We use loan performance as a direct measure of portfolio risk as well as less direct … market-based measures. Our results document that loan performance is highly correlated with AIRB risk weights and that, in … contrast, Basel I risk weights are not reflective of loan performance. We find that capital requirements under the AIRB …

We empirically assess the sensitivity of Basel risk weights to bank portfolio risk and the business cycle. With our … econometric model, we distinguish between cross-sectional risk sensitivity and longitudinal risk sensitivity (cyclicality) of the … regulatory standard. Employing a comprehensive data set covering 200 large banks from 28 countries, we find that actual risk …