The savings and loan crisis of the 1980s revealed the vulnerability of some depository institutions to changes in interest rates. Since that episode, U.S. bank supervisors have placed more emphasis on monitoring the interest rate risk of commercial banks. Economists at the Board of Governors of...

In 2007 Britain experienced its first run on a bank of any macroeconomic significance since 1866. This was not dealt with by the method that had maintained banking stability for so long: letting the bank fail but supplying abundant liquidity to the markets to prevent contagion. In this paper the...

In this paper, using industry sector stock returns as proxies of firm asset values, we obtain bank capital requirements (through the cycle). This is achieved by Montecarlo simulation of a bank loan portfolio loss density. We depart from the Basel 2 analytical formula developed by Gordy (2003)...

We use to define risk as the possibility of suffering a loss. Starting this, risk management is defined as a business process whose purpose is to ensure that the organization is protected against risks and their effects. In order to prioritize, to develop a response plan and after that to...

In order to capture observed asymmetric dependence in international financial returns, we construct a multivariate regime-switching model of copulas. We model dependence with one Gaussian and one canonical vine copula regime. Canonical vines are constructed from bivariate conditional copulas and...

We define CoVaR as the value at risk (VaR) of financial institutions conditional on other institutions being in distress. The increase of CoVaR relative to VaR measures spillover risk among institutions. We estimate CoVaR using quantile regressions and document significant CoVaR increases among...

The goal of integrated risk management in a financial institution is to measure and manage risk and capital across a range of diverse business activities. This requires an approach for aggregating risk types (market, credit, and operational) whose distributional shapes vary considerably. In this...