In measuring its Operational Risk VaR, a bank needs to pay attention when including external data in its internal loss collection. In principle, these data should be scaled consistently to the specific nature of the bank's risk, but this is not done by the majority of institutions with advanced...

This article discusses some of the challenges present in embedding Enterprise Risk Management issues like corporate governance, independence of CRO, challenges in implementing three lines of defense model, lack of risk knowledge in the first line of defense, lack of risk qualification in the...

We address the paradox that financial innovations aimed at risk-sharing appear to have made the world riskier. Financial innovations facilitate hedging idiosyncratic risks among agents; however, aggregate risks can be hedged only with liquid assets. When risk-sharing is primitive, agents...

The article addresses the issue of stress testing based on the probability of bankruptcy and a rating migration matrix. The analysis is conducted on a sample of listed companies in Poland in the years 1998-2016, and the forecasts are made for the years 2016-2018. Particular attention is paid to...

Derivatives activity, motivated by risk-sharing, can breed risk taking. Bad news about the risk of the asset underlying the derivative increases the expected liability of a protection seller and undermines her risk prevention incentives. This limits risk-sharing, and may create endogenous...

Derivatives activity, motivated by risk-sharing, can breed risk taking. Bad news about the risk of the asset underlying the derivative increases the expected liability of a protection seller and undermines her risk prevention incentives. This limits risk-sharing, and may create endogenous...

We consider a nonparametric method to estimate conditional expected shortfalls, i.e. conditional expected losses knowing that losses are larger than a given loss quantile. We derive the asymptotic properties of kernal estimators of conditional expected shortfalls in the context of a stationary...

The recent international credit crisis has highlighted the significant exposure that banks and insurers, especially mono-line credit insurers, have to residential house price risk. This paper provides an assessment of risk models for residential property for applications in banking and insurance...

This third chapter of the course focuses on the importance of strategy and corporate governance. Both play a very crucial role in the success of risk management. Most companies in the past have failed due to either poor strategies or not finding enough risks within their strategy. The classic...

We build a model to simulate how the euro area market-based financial system may function under stress. The core of the model is a set of representative agents re ecting key economic sectors, which interact in asset, funding, and derivatives markets and face solvency and liquidity constraints on...