This paper provides an empirical analysis of the risk of trading revenues of U.S. commercial banks. We collect … quarterly data on trading revenues, broken down by business line, as well as the Value at Risk-based market risk charge. The … across business lines. These low correlations do not corroborate systemic risk concerns. Neither is there evidence that the …

Value at Risk has become the standard measure of market risk employed by financial institutions for both internal and … methodologies developed so far give satisfactory solutions. Interpreting Value at Risk as a quantile of future portfolio values … assumptions invoked by existing methodologies (such as normality or i.i.d. returns). The Conditional Value at Risk or CAViaR model …

the unpriced risk. We apply our methodology to hedge out unpriced risk in the Fama and French (2015) five-factors. We find …

It is widely believed that correlations between international equity markets tend to increase in highly volatile bear … markets. This has led some to doubt the benefits of international diversification. This article solves the dynamic portfolio … highly correlated and have lower means. Solving the dynamic asset allocation problem for a CCRA investor, we show …

Over the last twenty years, the consensus view of systemic risk in the financial system that emerged in response to the … facing financial institutions. The dramatic rise of modern risk management has changed how the risks of financial … institutions are measured and how these institutions are managed. However, modern risk management is not without weaknesses that …

place greater weight on downside risk demand additional compensation for holding stocks with high sensitivities to downside … market movements. We show that the cross-section of stock returns reflects a premium for downside risk. Specifically, stocks … that covary strongly with the market when the market declines have high average returns. We estimate that the downside risk …

In the face of rising climate risk, financial institutions may adapt by transferring such risk to securitizers that … to climate risk may be a drop in the ocean of cash flows. This paper builds a data set of the entire securitization chain … correlation in wildfire events (within-deal correlation), leads to a lower exposure to wildfire events. These quantifiable metrics …

regulatory initiatives, including proposed new capital requirements, are under consideration as a means of reducing systemic risk …. This paper examines the concept of systemic risk -- that failure of one firm will lead to the failure of a large number of … and integrated and the effects of OTC derivatives on these risks discussed. The key conclusion is that systemic risk has …

We propose a measure for systemic risk: CoVaR, the value at risk (VaR) of the financial system conditional on … institutions being under distress. We define an institution's contribution to systemic risk as the difference between CoVaR … leverage, size, and maturity mismatch predict systemic risk contribution. We also provide out of sample forecasts of a …

This study is concerned with establishing the determinants of banks' exposure to risk and with predicting risk in … banking. Using the COMPUSTAT data base, prediction rules have been developed for two aspects of risk: systematic risk (risk … that is related to covariance with the market portfolio) and residual risk (the aggregate of specific …