Current practice largely follows restrictive approaches to market risk measurement, such as historical simulation or … produce more accurate risk assessments, treating both portfolio-level and asset-level analysis. Asset-level analysis is … particularly challenging because the demands of real-world risk management in financial institutions - in particular, real …

We study risk management in financial institutions using data on hedging of interest rate and foreign exchange risk. We … find strong evidence that institutions with higher net worth hedge more, controlling for risk exposures, both across …

the guarantee-extending parties to "walk away". I derive the optimal risk management rule in such a framework and show … that it allows high volatility choices, while net worth is high. However, risk limits tighten abruptly when the firm's net … risk management rules, and can account for phenomena such as "flight to quality" …

user cost of funds") for the risk inherent in that corresponding financial transaction. Otherwise, nominal financial output … required risk correction can be implemented practically at the level of industries (e.g., the banking sector as a whole). The …

In this paper we argue that risk-adjustment matters for the valuation of financial distress costs, since financial … distress is more likely to happen in bad times. Systematic distress risk implies that the risk-adjusted probability of … a discount rate that is lower than the risk free rate. We derive a formula for the valuation of distress costs, and …

Over the last twenty years, the consensus view of systemic risk in the financial system that emerged in response to the … facing financial institutions. The dramatic rise of modern risk management has changed how the risks of financial … institutions are measured and how these institutions are managed. However, modern risk management is not without weaknesses that …

Quantification of operational risk has received increased attention with the inclusion of an explicit capital charge … for operational risk under the new Basle proposal. The proposal provides significant flexibility for banks to use internal … models to estimate their operational risk, and the associated capital needed for unexpected losses. Most banks have used …

change and the economy; and (iii) further explore "compound risk" scenarios in which climate risks co-occur with other risks … risk pricing in financial markets; and (iv) better understand and incorporate the process of expectations formation around …

This paper assesses the current state of knowledge about crisis risk and its implications for risk management. Better … data that became available since the Global Financial Crisis (GFC) has improved our understanding of crisis risk. These …