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. …

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 …

styles under a number of criteria including consistency from an accounting standpoint, counterparty risk hedgeability … allocation. -- Counterparty credit risk ; CVA ; DVA ; margin lending ; securitisation ; Basel III ; CCP ; clearing ; collateral …

exposed to credit and interest rate risk and demonstrates how the model can be calibrated empirically. The main features of … macroeconomic risk factors, 3) Principal component analysis helps to reduce the dimensionality of the space of systematic risk … factors, 4) Due to data limitations, the results of reverse stress tests are exposed to considerable model and estimation risk …

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 …

greater risk. By exploiting the enactment of the American Taxpayer Relief Act 2012 as an exogenous tax shock, we observe that … co-investing fund managers increase risk-taking by 8%. Specifically, these managers adjust their portfolios by investing …

The subprime crisis revealed that the adoption of suitable systems for the management of credit risk is of utmost … assessing the capital adequacy. This paper investigates whether decisions on total risk-based capital ratios are channeled … thus advance regulation. -- Risk management ; regulation ; capital requirement ; credit portfolio model ; propensity score …

We investigate financial intermediaries’ interest rate risk management as the simultaneous decision of on …-balance-sheet exposure and interest rate swap use. Our findings show that both decisions are substitute risk management strategies. A higher … compliance with the interest rate risk regulation. Although hedging motives dominate, we find selective hedging behavior in swap …

decline. While participating contracts embedding these guarantees are designed to share market risk across investor cohorts … when guarantees are not binding, we study how binding guarantees distort inter-cohort risk sharing. Using regulatory data …