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Calibrating Your Intuition : Capital Allocation for Market and Credit Risk

Kupiec, Paul H. - 2002

Value-at-Risk (VaR) models often are used to estimate the equity investment that is required to limit the default rate on funding debt. Typical VaR ""buffer stock"" capital calculations produce biased estimates. To ensure accuracy, VaR must be modified by: (1) measuring loss relative to initial...

Persistent link: https://www.econbiz.de/10014401660

A New Risk Indicator and Stress Testing tool : A Multifactor Nth-to-Default CDS Basket

Avesani, Renzo G. - 2006

This paper generalizes a market-based indicator for financial sector surveillance using a multifactor latent structure in the determination of the default probabilities of an nth-todefault credit default swap (CDS) basket of large complex financial institutions (LCFIs). To estimate the...

Persistent link: https://www.econbiz.de/10014400409

FinTech in financial inclusion : machine learning applications in assessing credit risk

Bazarbash, Majid - 2019

Recent advances in digital technology and big data have allowed FinTech (financial technology) lending to emerge as a potentially promising solution to reduce the cost of credit and increase financial inclusion. However, machine learning (ML) methods that lie at the heart of FinTech credit have...

Persistent link: https://www.econbiz.de/10012021979

Probabilities of Default and the Market Price of Risk in a Distressed Economy

Segoviano Basurto, Miguel A. - 2011

We propose an original method to estimate the market price of risk under stress, which is needed to correct for risk aversion the CDS-implied probabilities of distress. The method is based, for simplicity, on a one-factor asset pricing model. The market price of risk under stress (the...

Persistent link: https://www.econbiz.de/10014401111

Systemic risk modeling : how theory can meet statistics

Espinoza, Raphael A.; Segoviano, Miguel A.; Ji, Yan - 2020

We propose a framework to link empirical models of systemic risk to theoretical network/ general equilibrium models used to understand the channels of transmission of systemic risk. The theoretical model allows for systemic risk due to interbank counterparty risk, common asset exposures/fire...

Persistent link: https://www.econbiz.de/10012251307

Credit Derivatives : Systemic Risks and Policy Options?

Kiff, John - 2009

Credit derivative markets are largely unregulated, but calls are increasingly being made for changes to this ""hands … next one. The purpose of this paper is to address two basic questions: (i) do credit derivative markets increase systemic … description of credit derivative markets and recent events, followed by an assessment of their recent association with systemic …

Persistent link: https://www.econbiz.de/10014402229

The lender of last resort function after the global financial crisis

Dobler, Marc; Gray, Simon; Murphy, Diarmuid; … - 2016

The global financial crisis (GFC) has renewed interest in emergency liquidity support (sometimes referred to as 'Lender of Last Resort') provided by central banks to financial institutions and challenged the traditional way of conducting these operations. Despite a vast literature on the topic,...

Persistent link: https://www.econbiz.de/10011436788

A New Heuristic Measure of Fragility and Tail Risks : Application to Stress Testing

Schmieder, Christian - 2012

This paper presents a simple heuristic measure of tail risk, which is applied to individual bank stress tests and to public debt. Stress testing can be seen as a first order test of the level of potential negative outcomes in response to tail shocks. However, the results of stress testing can be...

Persistent link: https://www.econbiz.de/10014395738

Central bank risk management, fintech, and cybersecurity

Khan, Ashraf; Malaika, Majid - 2021

Based on technical assistance to central banks by the IMF's Monetary and Capital Markets Department and Information Technology Department, this paper examines fintech and the related area of cybersecurity from the perspective of central bank risk management. The paper draws on findings from the...

Persistent link: https://www.econbiz.de/10012604809

Liquidity at risk : joint stress testing of solvency and liquidity

Cont, Rama; Kotlicki, Artur; Valderrama, Laura - 2020

The traditional approach to the stress testing of financial institutions focuses on capital adequacy and solvency. Liquidity stress tests have been applied in parallel to and independently from solvency stress tests, based on scenarios which may not be consistent with those used in solvency...

Persistent link: https://www.econbiz.de/10012251907

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