Technical paper/Internal models
Validation of index and benchmark assignment: adequacy of capturing tail risk
This paper provides practical recommendations for the validation of risk models under the Targeted Review of Internal Models (TRIM).
Risk data validation under BCBS 239
Based on a survey of twenty-nine major financial institutions, this paper aims to advise banks and other financial services firms on what is needed to get ready for and become compliant with BCBS 239, especially in the area of risk data validation.
Balance-sheet interest rate risk: a weighted Lp approach
In this paper, the authors introduce a new interest rate risk measure that is a product of two factors: one related to the distance between assets and liabilities in the Lp-space of financial instruments, and the other linked to the performance of the…
Forecasting corporate defaults in the German stock market
In this paper, the authors estimate and test several default risk models using new and unique data on corporate defaults in the German stock market.
A Darwinian view on internal models
In this paper, Paul Embrechts reviews discussions on regulation within banking (Basel III and IV) and insurance (Solvency II and Swiss Solvency Test (SST)) from a historical, personal and academic point of view.
Identification and capitalisation of non-modellable risk factors
Adolfo Montoro, Tim Becker and Lars Popken propose techniques for systematically capturing and categorising non-modellable risk factors and risk-adequate aggregation
Basel II versus III: a comparative assessment of minimum capital requirements for internal model approaches
This paper provides a comparative assessment of the minimum capital requirement (MCR) in three prominent versions of the Basel regulatory framework.
Stress tests and risk capital
For many financial institutions, "stress tests" are an important input into processes that set risk capital allocations. In the current regulatory environment, two distinct model-based approaches for setting regulatory capital requirements include stress…