M-PRESS-CreditRisk is a new top-down macro stress testing framework that can help supervisors gauge banks' capital adequacy related to credit risk. For the first time, it combines calibration of microprudential capital requirements and macroprudential buffers in a unified, coherent framework....

We apply Bayesian Model Averaging and a frequentistic model space analysis to assess the pricing-determinants of credit default swaps (CDS). Our study focuses on the complete model space of plausible models covering most of the variables and specifications used elsewhere in the literature,...

Regulatory capital for trading book positions includes two components that cover different risks but apply to the same portfolio, one for market risk and one for credit risk. Similar approaches are common in banks’ internal models for economic capital. Although it is known that joint market...

Our paper addresses firm size as a driver of systematic credit risk in loans to small and medium enterprises (SMEs). Key contributions are the use of a unique data set of SME lending by over 400 German banks and relating systematic risk to the size dependence of regulatory capital requirements....

Recent literature has proposed new methods for measuring the systemic risk of financial institutions based on observed stock returns. In this paper we examine the reliability and robustness of such risk measures, focusing on CoVaR, marginal expected shortfall, and option-based tail risk...

We derive multivariate risk-neutral asset distributions for major US financial institutions (FIs) using option implied marginal risk-neutral asset distributions (RNDs) and probabilities of default (PoDs). The multivariate densities are estimated by combining the entropy approach, dynamic copulas...

In attempting to promote bank stability, the Basel Committee on Banking Supervision (2006) provides a framework that seeks to control the amount of tail risk that large banks take in their trading books. However, banks around the world suffered sizeable trading losses during the recent crisis....

In the last decade, stress tests have become indispensable in bank risk management which has led to significantly increased requirements for stress tests for banks and regulators. Although the complexity of stress testing frameworks has been enhanced considerably over the course of the last few...