The majority of industry credit portfolio risk models, as well as recent scientific results, are based on isolated modules for default probabilities and recoveries in the event of default. This paper shows that these common methods lead to various econometric drawbacks when the parameters are...

In the recent literature, methods from extreme value theory (EVT) have frequently been applied for the estimation of tail risk measures. While previous analyses show that EVT methods often lead to accurate estimates for risk measures, a potential drawback lies in high standard errors of point...

Credit risk is an important issue in many finance areas, such as the determination of cost of capital, the valuation of corporate bonds and pricing of credit derivatives. Credit risk has also been a cause and consequence of the current financial crisis. Thus, methods for measuring credit risk,...

The Basel Committee on Banking Supervision recently proposed fundamental changes in the regulatory treatment of financial institutions' trading book positions. Among others, a replacement of Value-at-Risk (α=0.99) by Expected Shortfall (α=0.975) for the quantification of market risk is...