Various economic theories are available to explain the existence of credit and default cycles. There remains empirical ambiguity, however, as to whether or these cycles coincide. Recent papers_new suggest by their empirical research set-up that they do, or at least that defaults and credit...

We examine the quantification of operational risk for banks. We adopt a financial-economics approach and interpret operational risk management as a means of optimizing the profitability of an institution along its value chain. We start by defining operational risk and then propose a...

Various economic theories are available to explain the existence of credit and default cycles. There remains empirical ambiguity, however, as to whether or these cycles coincide. Recent papers_new suggest by their empirical research set-up that they do, or at least that defaults and credit...

Large banks assess their regulatory capital for market risk using complex, firm-wide Value-at-Risk (VaR) models. In their 'bottom-up' approach to VaR there are many sources of model risk. A recent amendment to banking regulations requires additional market risk capital to cover all these model...

This paper investigates one main of credit derivatives instruments, known as credit default swaps. CDS is very popular instruments in the credit market which is trading by governments, firms, investors. Credit default swaps, is contracted between two parties for a one party payment small amount...

This work presents a theoretical and empirical evaluation of the Anderson-Darling test when the sample size is limited. The test can be applied in order to back-test the risk factor dynamics in the context of counterparty credit risk modelling. We show the limits of this test when back-testing...

[Update: Within four weeks of the original publication of this research report, Risk Magazine reported in its 28th February 2012 issue story titled 'Goodbye VaR? Basel to Consider Other Risk Metrics': "A review of trading book capital rules, due to be launched in March by the Basel Committee on...

In the era of digitalization, cryptocurrencies have become an alternative asset for both retail and institutional investors. While the new emerging digital ecosystem based on blockchain technology has been praised for offering plenty of advantages such as decentralization, discretion or...

We propose a portfolio approach for operational risk quantification based on a class of analytical models from which we derive new results on the correlation problem. In particular, we show that uniform correlation is a robust assumption for measuring capital charges in these models

In this paper, we analytically review the applications of Extreme Value Theory for Market Risks Estimation. The mathematical definitions of modelling tails are explained and illustrated using suitable example. The application of EVT is significant to risk measures and educates the managers to...