A parsimonious extension of a well-known portfolio credit-risk model allows us to study a salient stylized fact … - abrupt switches between high- and low-loss phases - from a risk-management perspective. As uncertainty about phase switches … diversified within a phase. Likewise, the risk-management benefits of improving phase-switch forecasts increase with …

, but some banks are still characterized by low equity. Fourthly, African banks reduce lending to high risk-weighted loans …

Recent literature suggests that regulatory risk measures do not adequately capture the actual economic risk of bank … risk sensitivity, i.e., the response of Basel risk weights to asset volatility as our measure of a bank's asset portfolio … risk, is substantially higher than what has been shown so far in the literature. Despite the occasionally bad reputation …

This paper addresses the trade-off between additional loss-absorbing capacity and potentially higher bank risk … increase their risk-taking. This increase in risk-taking however, should be more than outweighed by the benefits of higher …

integration of new datasets and model validation efforts as well as the expanded use of stress-testing methodologies in risk and …

We present a model where bank assets are a portfolio of risky debt claims and analyze stockholders' risk … increases, risk shifting by borrowers increases, even if their leverage is unchanged (zombie lending). (2) While the literature … increase prevails through a second channel: an increase in risk shifting. (3) Risk shifting decreases with the diversification …

The incremental risk charge (IRC) is a new regulatory requirement from the Basel Committee in response to the recent … generated. The second Monte Carlo simulation is the random draws based on the constant level of risk assumption. It convolutes …

This paper analyses the risk and return of loans portfolios in a joint setting. I develop a model to obtain the … with a Value at Risk constraint. I also obtain closed form expressions for the interest rates that banks should set in … compensation for borrowers' credit risk under absence of arbitrage opportunities and I use these rates as a benchmark to interpret …

loans. In other words, the current capital regulations may not support the development of credit portfolio risk measurement … models as these would lead to higher capital requirements and hence lower lending volumes. The finding explains why risk … measurement techniques in real estate lending may be less developed than in other credit risk instruments. In addition, various …