Technical paper/Risk management
The impact of corporate social and environmental performance on credit rating prediction: North America versus Europe
The authors quantify the extent to which the quality of credit rating predictions improves by integrating measures of corporate social performance (CSP) in an established credit risk model. Their analysis provides comprehensive evidence of the…
What is essential is invisible to the eye: prioritizing near misses to prevent future disasters
Near misses represent a primary information source to analyze the operational risk exposure of a company, since they can reveal gaps in the control environment. The model proposed in this paper aims at identifying the most dangerous events that could…
Strategic and technology risks: the case of Co-operative Bank
This paper studies the growth by acquisition strategy embarked upon by a mid-sized UK bank, the Co-operative Bank; this strategy was a disaster, leaving a heretofore successful bank in dire trouble and on the block for buyers at a substantial discount to…
An emergent taxonomy for operational risk: capturing the wisdom of crowds
In this paper, the author takes a data-driven approach and combines the individual active taxonomies of sixty large financial institutions (fifty-eight for construction and two for validation) to create a coherent new reference taxonomy: the ORX…
Art-secured lending: a risk analysis framework
In this study, the authors identify the three types of risks involved in an art-secured lending operation and present a framework to assess their combined effects via a Monte Carlo simulation.
Measuring economic cycles in data
This paper determines if enough data is available for forecasting or stress testing, a better measure of data length is required.
The pricing of firm-specific risk in emerging markets
This paper finds that a zero-investment strategy that goes long (short) in the highest (lowest) quintiles of firm-specific risk earns overall positive excess returns across twenty-one emerging markets.
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.
Hedging incentives for financial institutions
Using a simple model, this paper derives two results that provide guiding principles for hedging by, and capital regulation of, financial institutions.
Currency risk in foreign currency accounts for small and medium-sized businesses
This paper estimates the currency exposure before and after the hedging of active foreign currency (FC) accounts, using stochastic models for spot exchange rates and cashflow movements.
Cyber risk management: an actuarial point of view
This paper points out the peculiarities of cyber insurance contracts compared with the classical nonlife insurance contracts from both the insurer’s and the insured’s perspectives. The main actuarial principles that are fundamental to any valuation in a…
Factor-based tactical bond allocation and interest rate risk management
This paper offers two composite bond market factor investment strategies each for the Swiss bond market and for the global sovereign bond market.
Central counterparty anti-procyclicality tools: a closer assessment
This paper investigates whether the substantial focus placed on the procyclicality of initial margin reflects both the original concerns at the time of the 2007-8 financial crisis and the intrinsic 'modus operandi' of CCPs.
Estimation of losses due to cyber risk for financial institutions
The objective of this paper is to analyze cyber risk from an operational risk perspective and to measure cyber risk empirically.
Could holding multiple safe havens improve diversification in a portfolio? The extended skew-t vine copula approach
In this paper, the authors propose a vine copula model based on a bivariate extended skew-t distribution and derive its corresponding multivariate tail dependence function.
Loss given default estimation: a two-stage model with classification tree-based boosting and support vector logistic regression
In this paper, the authors using a data set composed of five Japanese regional banks, propose an loss given default estimation model using a two-stage model, classification tree-based boosting and support vector regression (SVR).
Introducing a novel system-of-systems axiomatic risk management technique for production systems
This paper focuses on conceptual and modeling frameworks in an attempt to explore qualitative and quantitative risk management techniques for hierarchical SoS risks, exemplifying the production systems for demonstration.
An alternative approach for the operational risk assessment of a new product
The aim of this paper is to provide a new operational risk management framework to identify and mitigate the operational risk exposure arising from a new product.
The utility of Basel III rules on excessive violations of internal risk models
In this paper, the author looks at the efficacy of risk measures on energy markets and across several different stock market indexes, and calculates both the value-at-risk (VaR) and the expected shortfall (ES) on each of these data sets as well as on…
A review of the state of the art in quantifying operational risk
In this paper, the authors provide a comprehensive review of the different approaches developed to model operational risk, specifically focusing on the actuarial approach.
Global perspectives on operational risk management and practice: a survey by the Institute of Operational Risk (IOR) and the Center for Financial Professionals (CeFPro)
This paper presents survey results which represent comprehensive perspectives on operational risk practice, obtained from practitioners in a wide range of countries and sectors.
A general framework for constructing bank risk data sets
This paper proposes a general framework for constructing bank risk data sets, which provides an integrated process from data sources to comprehensive risk data sets.
Risk monitoring through better knowledge-based risk processes
The aim of this paper is to propose a model that describes the integration of knowledge-based risks (via the processes of knowledge-based risk identification, analysis, evaluation and education) and knowledge-based risk repositories to support risk…
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.