We propose a simple and implementable model of credit contagion where we include macro- and microstructural dependencies among the debtors within a credit portfolio. We show that, even for diversified portfolios, moderate microstructural dependencies already have a significant impact on the...

Credit limit management is of paramount importance for successful short-term credit-risk management, even more so when the situation in credit and financial markets is tense. We consider a continuous-time model where the credit provider and the credit taker interact within a game-theoretic...

The financial industry puts the Basle Committee under strain to align regulatory capital with economic capital. This could be reached by allowing more flexibility in the choice of risk measure for regulatory reporting. The authors show that if banks could use the theoretically more sound risk...

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 framework to...

In this paper operational risk is considered from a purely business or profitability point of view. We show for quantifiable operational risk that the three basic figures for profitability management - value, costs and risks - can be modelled such that an integrative point of view on...