In this study we develop and demonstrate a powerful and flexible forward-looking portfolio simulation methodology for assessing the correlated impacts of market risk, and private sector, sovereign and inter-bank default risk on both individual banks (i.e. 28 of the largest Brazilian banks) and...

In this study we develop and demonstrate a powerful and flexible forward-looking portfolio simulation methodology for assessing the correlated impacts of market risk, and private sector, sovereign and inter-bank default risk on both individual banks (i.e. 28 of the largest Brazilian banks) and...

This paper sets out to help explain why estimates of asset correlations based on equityprices tend to be considerably higher than estimates based on default rates. Resolving thisempirical puzzle is highly important because, rstly, asset correlations are a key driver ofcredit risk and, secondly,...