In line with regulations and common risk management practice, the credit risk of a portfolio is managed via its … computations to exposure computations, firms find it expedient to compute these exposures under the risk neutral measure.Here we … show that exposures computed under the risk neutral measure are essentially arbitrary. They depend on the choice of …

Choosing a proper external risk measure is of great regulatory importance, as exemplified in the Basel II and Basel III … Accord which use Value-at-Risk (VaR) with scenario analysis as the risk measures for setting capital requirements. We argue a … good external risk measure should be robust with respect to model misspecification and small changes in the data. A new …

This paper evaluates the model risk of models used for forecasting systemic and market risk. Model risk, which is the … periods, the underlying risk forecast models produce similar risk readings; hence, model risk is typically negligible. However … the reliability of risk readings. Finally, particular conclusions on the underlying reasons for the high model risk and …

The article deals with the liquidity risk in the banks in the context of the financial crisis. At first, the balance … sheet and market liquidity are defined and the main principles of the methods for measuring liquidity risk, which banks use …

quantile and expectile estimation, a platform for risk assessment is provided. ES and implications for tail events under … different distributional scenarios are investigated, particularly we discuss the implications of increased tail risk for mixture … can be successfully estimated on a daily basis using a one-year time horizon across different risk levels. …

Bilateral derivatives valuation is subject to counterparty credit risk (CCR) in that a counterparty could jump to … default or its credit spread could vary over time. In the nomenclature of risk management, the former is called CCR exposure … in risk management has been challenging and controversial. The CVA capital charge, for example, has gone through a few …

-siders the standard risk management measure Value-at-Risk (“VaR”). We apply the theory of local martingales, present a styled … that asset price bubbles result in materially inflated VaR measures. The implication of this finding for portfolio and risk … these asset types. We also measure the model risk arising from mispecifying the process driving cryptocurrencies by ignoring …

-siders the standard risk management measure Value-at-Risk (“VaR”). We apply the theory of local martingales, present a styled … that asset price bubbles result in materially inflated VaR measures. The implication of this finding for portfolio and risk … these asset types. We also measure the model risk arising from mispecifying the process driving cryptocurrencies by ignoring …

We show that any objective risk measurement algorithm mandated by central banks for regulated financial entities will … result in more risk being taken on by those financial entities than would otherwise be the case. Furthermore, the risks taken …: continue regulating by enforcing risk measurement algorithms at the cost of occasional severe crises, regulate more severely …

The financial crisis exposed enormous failures of risk management by financial institutions and of the authorities … assess where the balance has been struck between the robustness and the risk sensitivity of the capital framework. This paper … fundamental tradeoffs that may exist between robustness, complexity, and risk sensitivity. We review the history of risk …