Risk magazine - Volume16/No3

Basel’s CDO solution

As the Basel Committee on Banking Supervision continues its stately progress towards a revised capital Accord, one area remains under debate: the proposed capital rules for asset securitisations. As some readers will recall, it was securitisations that…

Capturing the smile

Since the discovery that traditional calibration methods fail to capture the dynamics of the smile, new approaches based on mixtures or ensembles of models have been developed. Simon Johnson and Han Lee present a variant of this approach that can be used…

Random tranches

How should economic or regulatory capital be allocated to tranches of securitisations? The standard Basel conditional dependence calculations are complicated in this case by non-linearity effects and complex deal dependence. Here, Michael Gordy and David…

Contributions to credit risk

Optimisation of credit portfolios requires that risk contributions be quantified. However, there has been disagreement over which of three popular tail risk measures should be used. Here, Alexandre Kurth and Dirk Tasche offer a way forward, showing how…

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