The internal models amendment to the Basel Accord allows banks to use internal models to forecast Value-at-Risk (VaR) thresholds, which are used to calculate the required capital that banks must hold in reserve as a protection against negative changes in the value of their trading portfolios. As...

A risk management strategy is proposed as being robust to the Global Financial Crisis (GFC) by selecting a Value-at-Risk (VaR) forecast that combines the forecasts of different VaR models. The robust forecast is based on the median of the point VaR forecasts of a set of conditional volatility...

We analyze the effect of skewness in a simple two-asset framework. Returns follow the split bivariate normal distribution, which is a combination of bivariate normal distributions with different standard deviations. We show that expected returns deviate from the CAPM in equilibrium if assets...

This paper analyzes the interdealer-broker market for single-name Credit Default Swaps (CDSs) using a novel dataset from the GFI trading platform. We find that CDSs exhibit reverse J-shaped patterns for trading and quoting activity in the U.S., and U-shaped patterns in Europe and Japan. We also...

The purpose of the paper is twofold. First, it aims at identifying when UK and European (France, Germany, Italy and Spain) Credit Default Swaps(CDSs) exhibit explosivity with respect to their past behaviors. Second, it seeks to quantify the dynamics of CDS volatility spillover effects...

In the literature, there is no consensus as to which Value-at-Risk forecasting model is the best for measuring market risk in banks. In the study an analysis of Value-at-Risk forecasting model quality over varying economic stability periods for main indices from stock exchanges was conducted....