Credit factor models tend to obscure the economics in favour of tractability – and this puts them at odds with rigorous arbitrage-free martingale pricing methods. To resolve this, quants are looking...
Farid AitSahlia Warrington College of Business Administration, University of Florida The global financial crisis of 2007-8 illustrated the shortcomings of several modeling approaches in a dramatic fashion....
Single bank default could affect multiple CCPs, leading to crippling default contribution for existing members and a chain of bank failures
Insurance Risk and BNY Mellon have conducted a survey to look at how insurance companies are preparing for the new regime and the opportunities and challenges that the changes will bring.
More Default risk articles
This paper examines the empirical relationship between credit risk and interest rate risk. We use credit default swap (CDS) spreads as our measure of credit risk. Also, we control for the variation in the so-called fair-value spread that combines multiple...
Some have argued that the debit valuation adjustment – which measures the benefit to a bank from its own potential for default – is monetisable. They claim replication strategies involving the dealer buying its own bonds, or writing protection on...
In this paper, the theory of pricing to acceptability developed for incomplete markets is applied to marking one's own default risk. Following the work of Heckman, it is observed that assets and liabilities are not to be valued identically in financial...
This fall issue of The Journal of Risk Model Validation brings together three papers with a credit focus and one paper that is a more general methodological piece. This latter paper is likely to resonate more with equity risk managers but all four make...
Banco de España is one of a number of European supervisors allowing its banks to ignore a Basel 2.5 requirement to model default risk on government bonds
Aircraft, shipping and project finance all set to lose out as banks seek to constrain capital consumption, panellists warn
With default rates starting to recede and distressed fund managers reporting double-digit returns at the end of 2010, the stressed and distressed debt market may already have peaked. However, specialist investors in Europe and the US say dynamic strategies...
This paper discusses a number of diverse considerations that risk managers need to incorporate into their thought processes and recurring procedures if they are to fulfill their role more effectively in the future
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