Related papers: On the Necessity of Five Risk Measures
Regulation and risk management in banks depend on underlying risk measures. In general this is the only purpose that is seen for risk measures. In this paper we suggest that the reporting of risk measures can be used to determine the loss…
Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of systemic risk requires the design and implementation of tools for the efficient…
The management of operational risk in the banking industry has undergone significant changes over the last decade due to substantial changes in operational risk environment. Globalization, deregulation, the use of complex financial products…
To quantify the operational risk capital charge under the current regulatory framework for banking supervision, referred to as Basel II, many banks adopt the Loss Distribution Approach. There are many modeling issues that should be resolved…
Many banks adopt the Loss Distribution Approach to quantify the operational risk capital charge under Basel II requirements. It is common practice to estimate the capital charge using the 0.999 quantile of the annual loss distribution,…
This paper introduces and studies factor risk measures. While risk measures only rely on the distribution of a loss random variable, in many cases risk needs to be measured relative to some major factors. In this paper, we introduce a…
Credit capital requirements in Internal Rating Based approaches require the calibration of two key parameters: the probability of default and the loss-given-default. This letter considers the uncertainty about these two parameters and…
To quantify an operational risk capital charge under Basel II, many banks adopt a Loss Distribution Approach. Under this approach, quantification of the frequency and severity distributions of operational risk involves the bank's internal…
The Basel II internal ratings-based (IRB) approach to capital adequacy for credit risk plays an important role in protecting the Australian banking sector against insolvency. We outline the mathematical foundations of regulatory capital for…
Conditional forecasts of risk measures play an important role in internal risk management of financial institutions as well as in regulatory capital calculations. In order to assess forecasting performance of a risk measurement procedure,…
This paper considers the use for Value-at-Risk computations of the so-called Beta-Kotz distribution based on a general family of distributions including the classical Gaussian model. Actually, this work develops a new method for estimating…
The ongoing concern about systemic risk since the outburst of the global financial crisis has highlighted the need for risk measures at the level of sets of interconnected financial components, such as portfolios, institutions or members of…
Under Solvency II the computation of capital requirements is based on value at risk (V@R). V@R is a quantile-based risk measure and neglects extreme risks in the tail. V@R belongs to the family of distortion risk measures. A serious…
Systemic risk measures were introduced to capture the global risk and the corresponding contagion effects that is generated by an interconnected system of financial institutions. To this purpose, two approaches were suggested. In the first…
Starting from the requirement that risk measures of financial portfolios should be based on their losses, not their gains, we define the notion of loss-based risk measure and study the properties of this class of risk measures. We…
We present a general framework for measuring the liquidity risk. The theoretical framework defines a class of risk measures that incorporate the liquidity risk into the standard risk measures. We consider a one-period risk measurement…
The European insurance sector will soon be faced with the application of Solvency 2 regulation norms. It will create a real change in risk management practices. The ORSA approach of the second pillar makes the capital allocation an…
In this paper, we study properties of certain risk measures associated with acceptance sets. These sets describe regulatory preconditions that have to be fulfilled by financial institutions to pass a given acceptance test. If the financial…
On March 4th 2016 the Basel Committee on Banking Supervision published a consultative document where a new methodology, called the Standardized Measurement Approach (SMA), is introduced for computing Operational Risk regulatory capital for…
Risk measures for random vectors have been considered in multi-asset markets with transaction costs and financial networks in the literature. While the theory of set-valued risk measures provide an axiomatic framework for assigning to a…