SSRN Author: Mirela PredescuMirela Predescu SSRN Content
http://www.ssrn.com/author=1557616
http://www.ssrn.com/rss/en-usThu, 29 Mar 2018 01:18:28 GMTeditor@ssrn.com (Editor)Thu, 29 Mar 2018 01:18:28 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: Model Risk in the Fundamental Review of the Trading Book: The Case of the Default Risk ChargeThe recent Fundamental Review of the Trading Book (FRTB) resulted in revised standards for capital requirements for market risks in a bank’s trading book. As part of the ruleset, default risk needs to be measured and capitalized through a dedicated Default Risk Charge (DRC). With the DRC as an extreme tail risk measure at 99.9% confidence level for portfolio default losses at a one-year horizon, there is inherent model risk associated with the reflection of joint defaults. Wilkens and Predescu (2017) proposed an overall framework for modeling the DRC that is based on a Gaussian factor copula model to capture the coincidence of defaults. This paper assesses the resulting model risk by analyzing alternative copulas (Gaussian, Student t, and Clayton) and the influence on the DRC figures with the help of a set of example portfolios. The copula choice can affect the DRC considerably, especially for directional and less diversified portfolios; the influence on typical larger-scale, ...
http://www.ssrn.com/abstract=3053426
http://www.ssrn.com/1680027.htmlWed, 28 Mar 2018 07:45:08 GMTREVISION: Model Risk in FRTB: The Case of the Default Risk ChargeThe recent Fundamental Review of the Trading Book (FRTB) resulted in revised standards for capital requirements for market risks in a bank’s trading book. As part of the ruleset, default risk needs to be measured and capitalized through a dedicated Default Risk Charge (DRC). With the DRC as an extreme tail risk measure at 99.9% confidence level for portfolio default losses at a one-year horizon, there is inherent model risk associated with the reflection of joint defaults. Wilkens and Predescu (2017) proposed an overall framework for modeling the DRC that is based on a Gaussian factor copula model to capture the coincidence of defaults. This paper assesses the resulting model risk by analyzing alternative copulas (Gaussian, Student t, and Clayton) and the influence on the DRC figures with the help of a set of example portfolios. The copula choice can affect the DRC considerably, especially for directional and less diversified portfolios; the influence on typical larger-scale, ...
http://www.ssrn.com/abstract=3053426
http://www.ssrn.com/1661523.htmlThu, 25 Jan 2018 06:10:49 GMTREVISION: Model Risk in FRTB: The Case of the Default Risk ChargeThe recent Fundamental Review of the Trading Book (FRTB) resulted in revised standards for capital requirements for market risks in a bank’s trading book. As part of the ruleset, default risk needs to be measured and capitalized through a dedicated Default Risk Charge (DRC). With the DRC as an extreme tail risk measure at 99.9% confidence level for portfolio default losses at a one-year horizon, there is inherent model risk associated with the reflection of joint defaults. Wilkens and Predescu (2017) proposed an overall framework for modeling the DRC that is based on a Gaussian factor copula model to capture joint defaults. This paper assesses the resulting model risk by analyzing alternative copulas (Gaussian, Student t, and Clayton) and the influence on the DRC figures with the help of a set of example portfolios. The copula choice can affect the DRC considerably, especially for directional and less diversified portfolios; the influence on typical larger-scale, diversified ...
http://www.ssrn.com/abstract=3053426
http://www.ssrn.com/1634163.htmlMon, 16 Oct 2017 10:05:12 GMTREVISION: Default Risk Charge: Modeling Framework for the 'Basel' Risk MeasureRevised standards for capital requirements for market risks in a bank’s trading book have been issued as a result of the Fundamental Review of the Trading Book. Under the new standards, default risk needs to be measured and capitalized through a dedicated Default Risk Charge (DRC). While quantitative impact studies are ongoing and banks are preparing for these regulatory changes, this paper is the first to present a modeling framework for the DRC measure that projects losses over a one-year capital horizon at a 99.9% confidence level. The article discusses selected risk factor models to derive simulation-based loss distributions and the associated default risk figures. Model properties, implementation aspects and a comparison to the Standardised Approach for default risk are explored through the use of example portfolios.
http://www.ssrn.com/abstract=2638415
http://www.ssrn.com/1579002.htmlFri, 31 Mar 2017 14:28:54 GMTNew: Default Risk Charge: Modeling Framework for the 'Basel' Risk MeasureAs a result of the Basel Committee on Banking Supervision’s Fundamental Review of the Trading Book, revised standards for capital requirements for market risk in banks’ trading books have been issued. Under the new standards, default risk needs to be measured and capitalized through a dedicated default risk charge (DRC). Although quantitative impact studies are ongoing and banks are preparing for these regulatory changes, this paper is the first to present a modeling framework for the DRC measure that projects losses over a one-year capital horizon at a 99.9% confidence level. We discuss selected risk factor models, which we use to derive simulation-based loss distributions and associated default risk figures. The model’s properties, aspects of its implementation and a comparison with the standardized approach for default risk are explored through the use of example portfolios.
http://www.ssrn.com/abstract=2943437
http://www.ssrn.com/1578532.htmlThu, 30 Mar 2017 09:58:27 GMT