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 and credit risk of certain investments can be larger than the sum of risks … holdings or CDS portfolios – are also affected. There are realistic conditions under which credit risk (represented by ratings …

The Value at Risk approach (VaR) is more and more used as a tool for risk measurement. The approach however has … measurement: it is particularly interpretable as a special measure of shortfall risk. From that point of view VaR will be extended … shortcomings both from a theoretical and a practical point of view. VaR can be classified within existing concepts of risk …

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 estimates. We show that CoVaR exhibits undesired characteristics in the way it …

probabilities, on reduced-form credit risk stress testing. This type of uncertainty is omnipresent in most macroeconomic stress … testing applications due to short time series for banks' portfolio risk parameters and highly collinear macroeconomic … distributions and implied capital shortfalls by conducting a full-edged top-down credit risk stress test for over 1,500 German banks …

adequacy related to credit risk. For the first time, it combines calibration of microprudential capital requirements and …/country-specific systematic factors, the model focuses on credit default concentration risk as a major source of large losses that may have … systemic impact. A test run using a sample of 12 systemically important German banks provides measures for systemic credit risk …

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 … systematic risk from historical default rates. Our results suggest that systematic risk tends to increase with firm size …

real economic activity growth, in line with a risk shock. Conversely, a certainty shock (a shock strongly decreasing …