I introduce a novel, hierarchical model of tail dependent asset returns which can be particularly useful for measuring portfolio credit risk within the structural framework. To allow for a stronger dependence within sub-portfolios than between them, I utilise the concept of nested Archimedean...

This paper introduces a multivariate pure-jump Lévy process which allows for skewness and excess kurtosis of single asset returns and for asymptotic tail dependence in the multivariate setting. It is termed Variance Compound Gamma (VCG). The novelty of my approach is that, by applying a...

We put forward a Merton-type multi-factor portfolio model for assessing banks’ contributions to systemic risk. This model accounts for the major drivers of banks’ systemic relevance: size, default risk and correlation of banks’ assets as a proxy for interconnectedness. We measure systemic...

This paper proposes a semi-structural approach to identifying excessive household credit developments. Using an overlapping generations model, a normative trend level for the real household credit stock is derived that depends on four fundamental economic factors: real potential GDP, the...

Using a unique data set on German banks' sector specific loan exposures to the real economy and the corresponding write-offs and write-downs, we examine the impact of loan portfolio sector concentration on credit risk. By controlling for common risk factors, we separate the bank-specific...