Related papers: Regulatory Capital Modelling for Credit Risk
Within the Solvency II framework the insurance industry requires a realistic modelling of the risk processes relevant for its business. Every insurance company should be capable of running a holistic risk management process to meet this…
In the context of understanding the nature of the risk transformation process of the financial system we propose an iterative risk-trading game between several agents who build their trading strategies based on a general utility setting.…
We introduce a model in which a regulator employs mechanism design to embed her human capital beta signal(s) in a firm's capital structure, in order to enhance the value of her post career change indexed executive stock option contract with…
Based on supermodularity ordering properties, we show that convex risk measures of credit losses are nondecreasing w.r.t. credit-credit and, in a wrong-way risk setup, credit-market, covariances of elliptically distributed latent factors.…
In the world of modern financial theory, portfolio construction has traditionally operated under at least one of two central assumptions: the constraints are derived from a utility function and/or the multivariate probability distribution…
We develop an averaging approach to robust risk measurement under payoff uncertainty. Instead of taking a worst-case value over an uncertainty neighborhood, we weight nearby payoffs more heavily under a chosen metric and average the…
Credit Suisse First Boston (CSFB) launched in 1997 the model CreditRisk+ which aims at calculating the loss distribution of a credit portfolio on the basis of a methodology from actuarial mathematics. Knowing the loss distribution, it is…
Assessing regulatory compliance of personal financial advice is currently a complex manual process. In Australia, only 5%- 15% of advice documents are audited annually and 75% of these are found to be non-compliant(ASI 2018b). This paper…
Risk governance is not only about identifying and measuring adverse states of the world. It also asks when an institution is entitled to rely on a risk claim. This paper introduces modal epistemic tools for that second layer of QRM. For a…
This paper investigates the finite horizon risk-sensitive portfolio optimization in a regime-switching credit market with physical and information-induced default contagion. It is assumed that the underlying regime-switching process has…
Using particle system methodologies we study the propagation of financial distress in a network of firms facing credit risk. We investigate the phenomenon of a credit crisis and quantify the losses that a bank may suffer in a large credit…
Conformal predictive systems allow forecasters to issue predictive distributions for real-valued future outcomes that have out-of-sample calibration guarantees. On a more abstract level, conformal prediction makes use of in-sample…
We propose a bootstrap-based robust high-confidence level upper bound (Robust H-CLUB) for assessing the risks of large portfolios. The proposed approach exploits rank-based and quantile-based estimators, and can be viewed as a robust…
A Value-at-Risk based model is proposed to compute the adequate equity capital necessary to cover potential losses due to operational risks, such as human and system process failures, in banking organizations. Exploring the analogy to a…
We consider calculation of capital requirements when the underlying economic scenarios are determined by simulatable risk factors. In the respective nested simulation framework, the goal is to estimate portfolio tail risk, quantified via…
We study market-consistent valuation of liability cash flows motivated by current regulatory frameworks for the insurance industry. Building on the theory on multiple-prior optimal stopping we propose a valuation functional with sound…
Credit risk scorecards are logistic regression models, fitted to large and complex data sets, employed by the financial industry to model the probability of default of a potential customer. In order to ensure that a scorecard remains a…
To meet the Basel II regulatory requirements for the Advanced Measurement Approaches, the bank's internal model must include the use of internal data, relevant external data, scenario analysis and factors reflecting the business environment…
This paper considers an insurer with two collaborating business lines that faces three critical decisions: (1) dividend payout, (2) reinsurance coverage, and (3) capital injection between the lines, in the presence of model uncertainty. The…
The credit crisis of 2007 and 2008 has thrown much focus on the models used to price mortgage backed securities. Many institutions have relied heavily on the credit ratings provided by credit agency. The relationships between management of…