We show that banks' risk exposure in one asset category affects how they report regulatory risk weights for another … asset category. Specifically, banks report lower credit risk weights for their loan portfolio when they face higher risk … constraints. Our results suggest the existence of incentive spillovers across different risk categories. We relate this behavior …

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 …

Mutual fund risk-taking via active portfolio rebalancing varies both in the cross-section and over time. In this paper …, I show that the same is true for funds' off- balance sheet risk-taking, even after controlling for on-balance sheet … information. In the empirical application, I show that German equity funds have increased their risk-taking via synthetic leverage …

In the last decade, stress tests have become indispensable in bank risk management which has led to significantly … enhanced considerably over the course of the last few years, the majority of credit risk models (e.g. Merton (1974 … that the use of a Gaussian copula in credit risk stress testing should not by default be dismissed in favor of a heavy …

This paper deals with stress tests for credit risk and shows how exploiting the discretion when setting up and … probabilities are less exposed to model and estimation risk. In addition, the risk horizon over which the stress default … extensive robustness checks for model-based credit risk stress tests. …

that time in general resilient to the default of large banks, i.e. did not exhibit substantial contagion risk. Even though …

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 …

The internal ratings-based (IRB) approach maps bank risk profiles more adequately than the standardized approach. After … switching to IRB, banks' risk-weighted asset (RWA) densities are thus expected to diverge, especially across countries with … different supervisory strictness and risk levels. However, when examining 52 listed banks headquartered in 14 European countries …

. Furthermore, we find that the first implementation steps lead to the greatest risk-weighted assets reductions, which indicates … that bank risk management improves with a progressing rollout. …

-down, stress-testing framework to quantify systemic risk. The key transmission mechanism is a two-way interaction between the …