This paper discusses the role of the credit rating agencies during the recent financial crises. In particular, it examines whether the agencies can add to the dynamics of emerging market crises. Academics and investors often argue that sovereign credit ratings are responsible for pronounced...

A challenge in enterprise risk measurement for diversified financial institutions is developing a coherent approach to aggregating different risk types. This has been motivated by rapid financial innovation, developments in supervisory standards (Basel 2) and recent financial turmoil. The main...

Starting from the requirement that risk measures of financial portfolios should be based on their losses, not their gains, we define the notion of loss-based risk measure and study the properties of this class of risk measures. We characterize loss-based risk measures by a representation theorem...

Many methods exist for assessing and managing the risk of a portfolio. This article is about risk metrics and the ways investment consultants commonly apply these measurements to portfolio selection and evaluation. Two popular approaches to risk measurement and evaluation are compared: the...

The issue of model risk in default modeling has been known since inception of the Academic literature in the field. However, a rigorous treatment requires a description of all the possible models, and a measure of the distance between a single model and the alternatives, consistent with the...

This Columbia Law School Blue Sky Blog post advocates for the introduction of a Bayesian model that takes into account prior inputs in bank stress testing. Specifically, the priors would be the previous Federal Reserve adverse scenarios. Failure to consider these prior scenarios could...

This paper evaluates the model risk of models used for forecasting systemic and market risk. Model risk, which is the potential for different models to provide inconsistent outcomes, is shown to be increasing with market uncertainty. During calm periods, the underlying risk forecast models...

In this paper we pay tribute to one of the most successful financial innovations in recent times: the Credit Default Swap (CDS). Through a literature review on financial risks from 2000-2015 we develop a conceptual map to assess the importance and evolution of the CDS, along with the...

The article describes the use of a Value at Risk measure to analyze the effectiveness of a bank. Among various existing possibilities of using this measure, the use of a new method has been proposed, namely, correcting various indicators of bank interest margins by using the Value at Risk...

This article aims to build through the collection of inputs from prior research, regulatory input and practitioner's experience, a comprehensive definition of risk.Risk is not measurable uncertainty nor volatility. Risk is a three part concept: (1) risk is the potential that events may have an...