The unique capital structure of commercial banking - funding production with demandable debt that participates in the economy's payments system - affects various aspects of banking. It shapes commercial banks' comparative advantage in providing financial products and services to informationally...

Model risk as part of the operational risk is a serious problem for financial institutions. As the pricing of derivatives as well as the computation of the market or credit risk of an institution depend on statistical models the application of a wrong model can lead to a serious over- or...

Regulatory capital for trading book positions includes two components that cover different risks but apply to the same portfolio, one for market risk and one for credit risk. Similar approaches are common in banks’ internal models for economic capital. Although it is known that joint market...