In this paper, we derive two shrinkage estimators for the global minimum variance portfolio that dominate the traditional estimator with respect to the out-of-sample variance of the portfolio return. The presented results hold for any number of observations d + 2 and number of assets d 4. The...

We investigate German banks' exposure to interest rate risk. In finance, higher demand for a risky asset is typically associated with higher expected return. However, employing a utility function which implies both risk‐averse and risk‐seeking behavior depending on the level of profits, we...

To study bank behavior, we use tail events in the history of a bank's credit losses as a new type of shock to capital. When defined appropriately, such events are virtually unpredictable for bank managers and spread evenly over time and banks. We estimate from granular data of all German banks...

Using a unique data set on German banks' sector specific loan exposures to the real economy and the corresponding write-offs and write-downs, we examine the impact of loan portfolio sector concentration on credit risk. By controlling for common risk factors, we separate the bank-specific...

Using unique data sets on German banks, we decompose their net interest margin and quantify the different components by estimating the costs of the various functions they perform. We investigate three major functions: namely, liquidity and payment management for the customers, the bearing of...

We investigate German banks' exposure to interest rate risk. In finance, higher demand for a risky asset is typically associated with higher expected return. However, employing a utility function which implies both risk-averse and risk-seeking behavior depending on the level of profits, we show...