with the capital charges generated by two possible earnings-at-risk internal capital allocation models. We find that in … general, Basel's capital ratios are closer to those generated by our models for the groups with lower credit risk. We …

of misspecification. The results indicate that single factor models of instantaneous default risk face a significant … generating both relatively flat yield spreads when firms have low credit risk and steeper yield spreads when firms have higher … credit risk. …

Value-at-Risk forecasts internally estimated by banks. For a sample of large bank holding companies, we evaluate the … performance of banks' trading risk models by examining the statistical accuracy of the VaR forecasts. Although a substantial … literature has examined the statistical and economic meaning of Value-at-Risk models, this article is the first to provide a …

capital requirements may lead to increased portfolio risk, and capital-based premia do not deter risk-taking by well …-capitalized banks. On the other hand, risk-based capital standards may have favorable effects provided the requirements are stringent …

In the current regulatory framework, capital requirements are based on risk-weighted assets, but all business loans … carry a uniform risk weight, irrespective of variations in credit risk. The proposed new Capital Accord of the Bank for … International Settlements provides for a greater sensitivity of capital requirements to credit risk, raising the question of whether …

In this paper, we review the prevalence of the use of risk ratings by commercial banks that participated in the Federal … Reserve's Survey of Terms of Bank Lending to Farmers between 1997 and 2002. We find that adoption of risk rating procedures … held about steady over the period, with a little less than half the banks on the panel either not using a risk rating …

Jamshidian and Zhu (1997) propose a discrete grid method for simplifying the computation of Value at Risk (VaR) for … as depending on a small number of risk factors chosen using principal components analysis. Second, they use a discrete … cannot accurately estimate VaR for some fixed-income portfolios. First, risk factors chosen using principal components …

Many large financial institutions compute the Value-at-Risk (VaR) of their trading portfolios using historical … Simulation and BRW methods are both under-responsive to changes in conditional risk; and respond to changes in risk in an … asymmetric fashion: measured risk increases when the portfolio experiences large losses, but not when it earns large gains. The …