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The failure of supervisory stress testing : Fannie Mae, Freddie Mac, and OFHEO
Frame, W. Scott; Gerardi, Kristopher; Willen, Paul - 2015 - This version: March 2015
these GSEs as mortgage market conditions deteriorated in 2007 and 2008. The analysis focuses on a key element of OFHEO …
Persistent link: https://www.econbiz.de/10010510096
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The failure of supervisory stress testing : Fannie Mae, Freddie Mac, and OFHEO
Frame, W. Scott; Gerardi, Kristopher; Willen, Paul - 2015
for Fannie Mae and Freddie Mac. We study a key component of OFHEOs model - 30-year fixed-rate mortgage performance - and … in a significant underprediction of mortgage credit losses and associated capital needs at Fannie Mae and Freddie Mac …
Persistent link: https://www.econbiz.de/10010499577
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The demand for long-term mortgage contracts and the role of collateral
Liu, Lu - 2023
Long-term fixed-rate mortgage contracts protect households against interest rate risk, yet most countries have … fixation length tracks the life-cycle decline of credit risk in the mortgage market: the loan-to-value (LTV) ratio decreases … using shorter-term contracts. To quantify demand for long-term contracts, I develop a life-cycle model of optimal mortgage …
Persistent link: https://www.econbiz.de/10014309040
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A comprehensive view on risk reporting : evidence from supervisory data
Abbassi, Puriya; Schmidt, Michael - 2018
We show that banks' risk exposure in one asset category affects how they report regulatory risk weights for another asset category. Specifically, banks report lower credit risk weights for their loan portfolio when they face higher risk exposure in their trading book. This relationship is...
Persistent link: https://www.econbiz.de/10011826077
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Credit risk transfer and bank insolvency risk
Oordt, Maarten R. C. van - 2017
The present paper shows that, everything else equal, some transactions to transfer portfolio credit risk to third-party investors increase the insolvency risk of banks. This is particularly likely if a bank sells the senior tranche and retains a sufficiently large firstloss position. The results...
Persistent link: https://www.econbiz.de/10011777803
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The Impact of IRB Approach on the Credit Risk Exposure Under Basel II
Shimizu, Katsutoshi - 2014
This paper empirically investigates the impact of internal ratings-based (IRB) approach on the risk weight under Basel II. Assuming increasing cost of raising new capital when the requirement constraint is violated, this paper estimates the difference of unknown risk weight parameters between...
Persistent link: https://www.econbiz.de/10013065748
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Measuring Capital Adequacy Supervisory Stress Tests in a Basel World
Wall, Larry D. - 2015
The United States is now committed to using two relatively sophisticated approaches to measuring capital adequacy: Basel III and stress tests. This paper shows how stress testing could mitigate weaknesses in the way Basel III measures credit and interest rate risk, the way it measures bank...
Persistent link: https://www.econbiz.de/10013026153
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Measuring capital adequacy supervisory stress tests in a Basel world
Wall, Larry D. - 2013
The United States is now committed to using two relatively sophisticated approaches to measuring capital adequacy: Basel III and stress tests. This paper shows how stress testing could mitigate weaknesses in the way Basel III measures credit and interest rate risk, the way it measures bank...
Persistent link: https://www.econbiz.de/10010209131
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The adoption of stress testing : why the Basel capital measures were not enough
Wall, Larry D. - 2013
The Basel capital adequacy ratios lost credibility with financial markets during the crisis. This paper argues that failure was the result of the reliance of the Basel standards on overstated asset values in reported equity capital. The United States' stress tests were able to assist in...
Persistent link: https://www.econbiz.de/10010209147
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Advancements in stress-testing methodologies for financial stability applications
Budnik, Katarzyna; Marques, Aurea Ponte; Ben Hadj, … - 2024
This paper provides an overview of stress-testing methodologies in Europe, with a focus on the advancements made by the European Central Bank's Financial Stability Committee Working Group on Stress Testing (WGST). Over a four-year period, the WGST played a pivotal role in refining stress-testing...
Persistent link: https://www.econbiz.de/10014530302