circumstances. The model, which measures additional bank capital required to compensate for fluctuating credit risk, is a novel …In this paper, we develop a new capital adequacy buffer model (CABM) which is sensitive to dynamic economic … combination of the Merton structural model which measures distance to default and the timeless capital asset pricing model (CAPM …

puzzle, first detected in corporate bonds, consists of two stylized facts: Structural determinants of credit risk not only … models to account for information spillovers based on bank business model similarities. To capture this channel, we propose … Eurozone. Incorporating the network information into the structural model for bank credit spreads increases explanatory power …

-space methods, we model latent macro-financial and credit risk components for a large data setcomprising the U.S., the EU-27 area … assessed. We propose a novel framework to assessfinancial system risk. Using a dynamic factor framework based on state … risk conditions can significantly and persistently de-couplefrom macro-financial fundamentals. Such decoupling can serve as …

asymmetric information the banks face the risk of adverse selection. Credit Value-at-Risk (CVaR) regulation counters the problem … of low quality, i.e. high risk, loans and therefore reduces the risk of the bank loan portfolio. However, CVaR regulation …

The paper studies risk mitigation associated with capital regulation, in a context when banks may choose tail risk … assets. We show that this undermines the traditional result that higher capital reduces excess risk-taking driven by limited … liability. When capital raising is costly, poorly capitalized banks may limit risk to avoid breaching the minimal capital ratio …

aretriggered by a general latent factor model involving systematic andidiosyncratic risk. We show explicitly how the tail behavior …Using a limiting approach to portfolio credit risk, we obtain analyticexpressions for the tail behavior of the … of the distributionof these two risk factors relates to the tail behavior of the credit lossdistribution. Even if the …

conversion on the risk-taking behaviour of the issuing bank. We also test for regulatory arbitrage: do banks try to maintain risk … sample selection bias, we show that CoCo bonds issuance has a strong positive e↵ect on risk-taking behaviour, particularly … amplifies the impact of CoCo bonds on risk-taking. …