A practically oriented, top-down approach to assessing the quality of EL by backtesting with a properly defined risk … measure is introduced. In a first step, the concept of risk expenses ("Cost of Risk") has to be extended beyond the classical … provisioning view, toward a more adequate capital consumption approach ("Impact of Risk"). On this basis, the difference between …

Assuming a risk-neutral bank and assuming household utility to be exponential, we show how under information symmetry …

The COVID-19 pandemic represented the emergence of an enormous, systemic, and largely un-anticipated economic risk. It … economy” firms differently. Traditional Coasian firms act as employee risk-pooling mechanisms. However, “gig economy …” structures disaggregate these risk pools, eroding the coinsurance function of the firm and discretely devolves significant risk …

credit risk amid greater uncertainty. These adverse impacts of uncertainty on bank lending (both quantity and quality) are …

Through the lens of market participants' objective to minimize counterparty risk, we provide an explanation for the … of the benefits and potential pitfalls with respect to a single market participant's counterparty risk exposure when … elements can render central clearing harmful for a market participant's counterparty risk exposure regardless of the number of …

products break down. So, we provide an estimation of the basis risk that arises when hedging credit portfolios with different … credit indices, to answer the following questions: Is there enough diversification of risk in a global credit portfolio to … allow for a good hedge? Is basis risk higher in North America than in Europe? Does the effectiveness of the hedge increase …

traders face this sort of joint inference problem, the risk of selecting the wrong features can spill over and distort how … even if traders themselves are fully rational. Moreover, I show how modeling feature-selection risk leads to additional … predictions that are outside the scope of noise-trader risk. For instance, to discover pricing errors as quickly as possible, a …

The calculation of the capital charge for CVA risk, as required by the Basel Committee on Banking Supervision, is … CDSs and CDS indices, and we also evaluate the level of basis risk still remaining under the hedge. We address several … questions: Is there enough diversification of risk in a global credit portfolio to allow for a good hedge? Is basis risk higher …

Credit grades are ordinal measures of default risk that are used to rank the relative creditworthiness of different ….For quantitative modeling, credit grades are best viewed as multipliers on a fluctuating aggregate default risk . Experience shows that … the scale is roughly logarithmic, with each full-letter drop in credit grade roughly quadrupling the default risk. The …

induction when their payoffs could be positive or negative. Moreover, the model can naturally capture wrong or right way risk …