conversion risk is the key feature of CoCo bonds. Because of this conversion risk, CoCo bonds are hard to price and an … exists, it is a decreasing function in the amount of equity held by the bank. Well-capitalized banks can thus issue CoCo … bonds at a lower price than least-capitalized banks. This is the reason why CoCo bonds are to be thought of more as a …

In line with regulations and common risk management practice, the credit risk of a portfolio is managed via its … manage their risks.Due to the growth of credit valuation adjustment (CVA) computations, and the similarity of CVA … computations to exposure computations, firms find it expedient to compute these exposures under the risk neutral measure.Here we …

Potential Future Exposure (PFE) is a standard risk metric for managing business unit counterparty credit risk but there … (one per calibration setup), or one of many risk-neutral measures (one per numeraire). However, we argue that limits should … be based on the bank's own risk appetite provided that this is consistent with regulatory backtesting and that whichever …

we show that a large amount of aggregate tail risk is missing from the cost of financial sector crash insurance during … the crisis. The difference in costs between out-of-the-money put options for individual banks and puts on the financial … guarantee for the financial sector lowers index put prices far more than those of individual banks and explains the increase in …

we show that a large amount of aggregate tail risk is missing from the cost of financial sector crash insurance during … the crisis. The difference in costs between out-of-the-money put options for individual banks and puts on the financial … guarantee for the financial sector lowers index put prices far more than those of individual banks and explains the increase in …

In this paper we obtain some formulas for pricing contingent convertibles subject to what we call extension risk, i …

Keeping in view that the roles of portfolio risk and the relationship between different risky lending assets in loan … valuation have not been studied empirically, this study examines the relationship between undiversiable portfolio risk and … portfolio lending with an attempt to fill the gap between the concept of portfolio risk diversification and the practice of …

We find that intermediary risk appetite plays an important role in the availability of dealer hedging services provided … residual risk in the futures market. Using novel data on WTI crude oil swaps and futures positions of individual dealers, we … present evidence that dealers hedgebespoke contracts with standard, liquid instruments and face basis risk. We conclude that …

Cyber risk, a type of operational risk, is today considered a key component in the enterprise risk management framework …. Under BASEL regulations, a bank could recognize the risk mitigating impact of the Cyber Liability Insurance (CLI) contract … while calculating the minimum operational risk capital requirement. Despite this benefit and the onerous data protection …