Related papers: Regulatory Capital Modelling for Credit Risk
The paper provides a stochastic model useful for assessing the capital requirement for demographic risk. The model extends to the market consistent context classical methodologies developed in a local accounting framework. In particular we…
Risk management is an important practice in the banking industry. In this paper we develop a new methodology to estimate and predict the probability of default (PD) based on the rating transition matrices, which relates the rating…
In this paper we develop a novel methodology for estimation of risk capital allocation. The methodology is rooted in the theory of risk measures. We work within a general, but tractable class of law-invariant coherent risk measures, with a…
Since 2016 the operation of insurance companies in the European Union is regulated by the Solvency II directive. According to the EU directive the capital requirement should be calculated as a 99.5\% of Value at Risk. In this study, we…
Sustaining efficiency and stability by properly controlling the equity to asset ratio is one of the most important and difficult challenges in bank management. Due to unexpected and abrupt decline of asset values, a bank must closely…
This study presents an ANWSER model (asset network systemic risk model) to quantify the risk of financial contagion which manifests itself in a financial crisis. The transmission of financial distress is governed by a heterogeneous bank…
Within the Own Risk and Solvency Assessment framework, the Solvency II directive introduces the need for insurance undertakings to have efficient tools enabling the companies to assess the continuous compliance with regulatory solvency…
Value-at-Risk and its conditional allegory, which takes into account the available information about the economic environment, form the centrepiece of the Basel framework for the evaluation of market risk in the banking sector. In this…
This paper studies an optimal investment and risk control problem for an insurer with default contagion and regime-switching. The insurer in our model allocates his/her wealth across multi-name defaultable stocks and a riskless bond under…
We set the context for capital approximation within the framework of the Basel II / III regulatory capital accords. This is particularly topical as the Basel III accord is shortly due to take effect. In this regard, we provide a summary of…
The Basel II Accords have sparked increased interest in the development of approaches based on internal ratings systems and have initiated the elaboration of models for remote ratings forecasts based on external ones as part of Risk…
The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence it is of utmost importance to study the mutual dependence of losses for different creditors in…
In this paper, we consider a risk process with deterministic growth and multiplicative jumps to model the capital of a low-income household. Reflecting the high-risk nature of the low-income environment, capital losses are assumed to be…
We propose a portfolio approach for operational risk quantification based on a class of analytical models from which we derive new results on the correlation problem. In particular, we show that uniform correlation is a robust assumption…
We develop a formalism for insurance profit optimisation for the in-force business constraint by regulatory and risk policy related requirements. This approach is applicable to Life, P&C and Reinsurance businesses and applies in all…
In the context of containment of default contagion in financial networks, we here study a regulator that allocates pre-shock capital or liquidity buffers across banks connected by interbank liabilities and common external asset exposures.…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…
Conformal risk control (CRC) provides distribution-free guarantees for controlling the expected loss at a user-specified level. Existing theory typically assumes that the loss decreases monotonically with a tuning parameter that governs the…
When interest rate dynamics are described by the Libor Market Model as in BGM97, we show how some essential risk-management results can be obtained from the dual of the calibration program. In particular, if the objetive is to maximize…
A justification of the Basel liquidity formula for risk capital in the trading book is given under the assumption that market risk-factor changes form a Gaussian white noise process over 10-day time steps and changes to P&L are linear in…