We introduce a new measure of systemic risk, the change in the conditional joint probability of default, which assesses the effects of the interdependence in the financial system on the general default risk of sovereign debtors. We apply our measure to examine the fragility of the European...

In addition to “classical” approaches, such as the Gaussian CreditMetrics or Basel II model, recently the use of other copulas has been proposed in the area of credit risk for modeling loss distributions, particularly T copulas which lead to fatter tails ceteris paribus. As an amendment to...

This paper documents nonlinear cross-sectional dependence in the term structure of U.S. Treasury yields and points out risk management implications. The analysis is based on a Kalman filter estimation of a two-factor affine model which specifies the yield curve dynamics. We then apply a broad...

This paper incorporates insurance contracts into an operational risk model based on idiosyncratic and common shocks. A key feature of the approach is the explicit modelling of residual risk inherent in insurance contracts, such as counterparty default, payment uncertainty and liquidity risk due...

In this paper, we examine the effect of implicit seller reserves on the estimation of value-at-risk based on historical asset sales data. We direct our examination toward how and whether fine art might prove an appropriate form of loan collateral for banks and other financial institutions. Using...

We propose the application of digit analysis using the Benford law to indicate managerial engagement in the capital allocation process. First, we motivate the potential of the Benford digit analysis to identify allocation outcomes that are shaped by human engagement instead of fixed decision...

The global financial crisis has shown that many financial institutions dealing with credit derivatives were exposed to severe unexpected losses. This indicates that systematic influences are decisively underestimated particularly with regard to structured products like securitized tranches of...

This paper analyses the pricing of systematic risk factors in credit default swap contracts in a two-stage empirical framework. In the first pass, we estimate contract-specific sensitivities to several systematic risk factors by time-series regressions using quoted credit default swap (CDS)...

Article refers to the issue of credit risk management in commercial banks. Particular attention is paid to the problem of stress testing. In addition, methods are presented that allow prediction of the losses of the portfolio in the context of extreme events relating to the crises of financial...

Article refers to the issue of credit risk management in commercial banks. Particular attention is paid to the problem of stress testing. In addition, methods are presented that allow prediction of the losses of the portfolio in the context of extreme events relating to the crises of financial...