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Risk measures based on benchmark loss distributions

Bignozzi, Valeria; Burzoni, Matteo; Munari, Cosimo-Andrea - 2018

We introduce a class of quantile-based risk measures that generalize Value at Risk (VaR) and, likewise Expected Shortfall (ES), take into account both the frequency and the severity of losses. Under VaR a single confidence level is assigned regardless of the size of potential losses. We allow...

Persistent link: https://www.econbiz.de/10011900226

Measuring and stress-testing market-implied bank capital

Indergand, Martin; Jondeau, Eric; Fuster, Andreas - 2022

We propose a methodology for measuring the market-implied capital of banks by subtracting from the market value of equity (market capitalization) a credit-spread-based correction for the value of shareholders' default option. We show that without such a correction, the estimated impact of a...

Persistent link: https://www.econbiz.de/10013168743

Bank capital, liquid reserves, and insolvency risk

Hugonnier, Julien; Morellec, Erwan - 2015

We develop a dynamic model of banking to assess the effects of liquidity and leverage requirements on banks' insolvency risk. In this model, banks face taxation, flotation costs of securities, and default costs and maximize shareholder value by making their financing, liquid asset holdings, and...

Persistent link: https://www.econbiz.de/10011293576

Measuring the capital shortfall of large U.S. banks

Jondeau, Eric; Khalilzadeh, Amir - 2018

We develop a methodology to measure the capital shortfall of commercial banks in a market downturn, which we call stressed expected loss (SEL). We simulate a market downturn as a negative shock on interest rate and credit market risk factors that reflect the banks' market-sensitive assets. We...

Persistent link: https://www.econbiz.de/10011877252

Who monitors climate risk of financial institutions? : evidence from catastrophe risks in insurance

Basten, Christoph; Kartasheva, Anastasia - 2024

Persistent link: https://www.econbiz.de/10014581696

Optimal investment and premium policies under risk shifting and solvency regulation

Filipović, Damir; Kremslehner, Robert; Muermann, Alexander - 2011

Limited liability creates a conflict of interests between policyholders and shareholders of insurance companies. It … the value policyholders attach to and premiums they are willing to pay for insurance coverage. We characterize Pareto … calibrate our model to a non-life insurer average portfolio. Risk Shifting, Insurance, Regulation, Pareto Optimality …

Persistent link: https://www.econbiz.de/10009009505

The long-term effects of capital requirements

De Nicolò, Gianni; Klimenko, Nataliya; Pfeil, Sebastian; … - 2021

We build a stylized dynamic general equilibrium model with financial frictions to analyze costs and benefits of capital requirements in the short-term and long-term. We show that since increasing capital requirements limits the aggregate loan supply, the equilibrium loan rate spread increases,...

Persistent link: https://www.econbiz.de/10012613033

Banks vs. markets: are banks more effective in facilitating sustainability?

Newton, David P.; Ongena, Steven; Xie, Ru; Zhao, Binru - 2022

Is bank- versus market-based financing different in its attitudes towards Environmental, Social, and Governance (ESG) risk? Using a novel sample covering 3,783 U.S. public firms from 2007 to 2020, we study how firm-level ESG risk affects its financing outcomes. We find that companies with higher...

Persistent link: https://www.econbiz.de/10013169151

Interest rate pass-through and bank risk-taking under negative-rate policies with tiered remuneration of central bank reserves

Basten, Christoph; Mariathasan, Mike - 2020

We identify the effects of negative interest rate policies on bank behavior using difference-in differences identification and data on all Swiss banks. First, we find that going negative can interrupt not only the pass-through from policy to deposit rates, but also that to mortgage rates....

Persistent link: https://www.econbiz.de/10012419657

A new indicator of bank funding cost

Jondeau, Eric; Mojon, Benoît; Sahuc, Jean-Guillaume - 2020

The cost of bank funding on money markets is typically the sum of a risk-free rate and a spread that reflects rollover risk, i.e., the risk that banks cannot roll over their short-term market funding. This risk is a major concern for policymakers, who need to intervene to prevent the funding...

Persistent link: https://www.econbiz.de/10012219137

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