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This paper analyzes the out-of-sample performance of two common extensions of the Black-Scholes framework, namely a GARCH and a stochastic volatility option pricing model.
In the aftermath of the financial crisis, there is interest in reforming bank regulation such that capital requirements are more closely linked to a bank's contribution to the overall risk of the financial system. In our paper we compare alternative mechanisms for allocating the overall risk of...
Analysts in a bank's research department cover firms that have no relationship with the bank as well as companies in which the bank has a strategic interest. Officially, banks must establish Chinese Walls around their research departments to allow the analysts to work independently and to avoid...
Risk management has become an important issue for banks and corporations, not only because of regulation but also because of risk adjusted performance measurement. Value-at-risk has become an industry standard in risk measurement. The aim of this paper is to evaluate the performance of different...
In the months preceding the failure of Lehman Brothers in September 2008, banks were willing to pay a premium over the Federal Reserve's discount window (DW) rate to participate in the much less flexible Term Auction Facility (TAF). We empirically test the predictions of a new signalling model...
In this paper we suggest a new approach to risk assessment for banks. Rather than looking at them individually we try to undertake an analysis at the level of the banking system. Such a perspective is necessary because the complicated network of mutual credit obligations can make the actual risk...