This paper discusses the role of the credit rating agencies during the recent financial crises. In particular, it examines whether the agencies can add to the dynamics of emerging market crises. Academics and investors often argue that sovereign credit ratings are responsible for pronounced...

The use of GARCH models with stable Paretian innovations in financial modeling has been recently suggested in the literature. This class of processes is attractive because it allows for conditional skewness and leptokurtosis of financial returns without ruling out normality. This contribution...

Bank internal ratings of corporate clients are intended to quantify the expected likelihood of future borrower defaults. This paper develops a comprehensive framework for evaluating the quality of standard rating systems. We suggest a number of principles that ought to be met by 'good rating...

Under the new Capital Accord, banks choose between two different types of risk management systems, the standard or the internal rating based approach. The paper considers how a bank's preference for a risk management system is affected by the presence of supervision by bank regulators. The model...

The Basel II Accord requires that banks and other Authorized Deposit-taking Institutions (ADIs) communicate their daily risk forecasts to the appropriate monetary authorities at the beginning of each trading day, using one or more risk models to measure Value-at-Risk (VaR). The risk estimates of...

The papers in this special issue of Mathematics and Computers in Simulation are substantially revised versions of the papers that were presented at the 2011 Madrid International Conference on “Risk Modelling and Management” (RMM2011). The papers cover the following topics: currency hedging...