A challenge in enterprise risk measurement for diversified financial institutions is developing a coherent approach to aggregating different risk types. This has been motivated by rapid financial innovation, developments in supervisory standards (Basel 2) and recent financial turmoil. The main...

This Columbia Law School Blue Sky Blog post advocates for the introduction of a Bayesian model that takes into account prior inputs in bank stress testing. Specifically, the priors would be the previous Federal Reserve adverse scenarios. Failure to consider these prior scenarios could...

This article examines the impact of the new supervisory standards of Basel 2.5 and Basel III for bank trading portfolios with regards to the additional capital requirements developed to mitigate liquidity risk and credit risk. Using the incremental risk charge (IRC), the authors estimate risk...

In this study, we consider the construction of through-the-cycle ("TTC") PD models designed for credit underwriting uses and point-in-time ("PIT") PD models suitable for early warning uses, considering which validation elements should be emphasized in each case. We build PD models using a long...