In the view of the current discussion on how to regulate the emerging InsurTech companies, if at all, the author attempts to demonstrate that rather than automatically introducing new regulation, the principle of proportionality can, in most cases, help to adapt application of the existing rules...

Recent crises in the financial industry have shown weaknesses in the modeling of Risk-Weighted Assets (RWAs). Relatively minor model changes may lead to substantial changes in the RWA numbers. Similar problems are encountered in the Value-at-Risk (VaR)-aggregation of risks. In this article, we...

The primary objective of this work is to analyze model based Value-at-Risk associated with mortality risk arising from issued term life assurance contracts and to compare the results with the capital requirements for mortality risk as determined using Solvency II Standard Formula. In particular,...

We explore the Monte Carlo steps required to reduce the sampling error of the estimated 99.9% quantile within an acceptable threshold. Our research is of primary interest to practitioners working in the area of operational risk measurement, where the annual loss distribution cannot be...

This paper presents the first methodological proposal of estimation of the VaR. Our approach is dynamic and calibrated to market extreme scenarios, incorporating the need of regulators and financial institutions in more sensitive risk measures. We also propose a simple backtesting methodology by...

This article reviews two leading measures of financial risk and an emerging alternative. Embraced by the Basel accords, value-at-risk and expected shortfall are the leading measures of financial risk. Expectiles offset the weaknesses of value-at-risk (VaR) and expected shortfall. Indeed,...

The purpose of the Bank for International Settlements regulatory agenda, as implemented by financial regulators globally, has been to make banks safer and reduce the likelihood of systemic events. Using an original model of bank profit maximisation under a regulatory constraint, we statistically...

Under the revised market risk framework of the Basel Committee on Banking Supervision, the model validation regime for internal models now requires that models capture the tail risk in profit-and-loss (P&L) distributions at the trading desk level. We develop multi-desk backtests, which...