This evaluation examines IDB's management of credit risk of Non-Sovereign Guaranteed Operations. Although the IDB is not subject to the Principles for the Management of Credit Risk issued by the Basel Committee for Banking Supervision, these principles have been used as guidelines for this...

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...