- game theory is a useful set of tools for better understanding different risk settings. Embedded in a short history of the …Basel II changes risk management in banks strongly. Internal rating procedures would lead one to expect that banks are … changing over to active risk control. But, if risk management is no longer a simple "game against natureʺ, if all agents …

The game-theoretical analysis of this paper shows that stress tests that cover the entire banking sector (macro stress … persuasion we show that a banking authority can create value when committing to disclose the stress-testing methodology (signal … enhance welfare. The paper offers a new theory to explain why stress tests are generally welfare enhancing. We also offer a …