Technical paper/Banking regulation
Variance estimation for the quantification of the margin of conservatism category C
This paper discusses a new estimator for probability of default and compare its performance against two alternative approaches, demonstrating the novel method to have a lower bias and variance.
A numerical simulation approach to study systemic risk in banking systems
The authors introduce a simple numerical algorithm to study banking systems subject to credit risk. The algorithm is based on a model that is completely defined by only two parameters.
Supervisory bank risk early warning modeling: an examiner’s first line of defense
The results of this paper show that robust forward-looking statistical models are superior to backward-looking assessments of supervisory compliance, which could lead to less regulatory burden when integrated into the examination process, particularly at…
An internal default risk model: simulation of default times and recovery rates within the new Fundamental Review of the Trading Book framework
This paper presents a new default risk model for market risk that is consistent with these requirements. The recovery rates follow a waterfall model that is based on a minimum entropy principle.
Is operational risk regulation forward looking and sensitive to current risks?
This paper evaluates the operational risk capital requirements of large US banks to determine whether they are forward looking, sensitive to banks’ current exposures and designed to allow for risk mitigation.
Predictive fraud analytics: B-tests
In this paper, the authors look at B-tests: methods by which it is possible to identify internal fraud among employees and partners of the bank at an early stage.
Forward-looking and incentive-compatible operational risk capital framework
This paper proposes an alternative framework for setting banks’ operational risk capital, which allows for forward-looking assessments and limits gaming opportunities by relying on an incentive-compatible mechanism.