Overview

Model Risk stands out as a guide in uncertain times. This important book stands out as it enables financial institutions and their regulators to account for model risk. The result will be more accurate and pragmatic approaches to risk measurement and a more realistic view on the benefits as well as shortcomings of financial risk models. This book provides leadership and will shape industry thought in an area that currently lacks any authoritative literature on the subject. To date, model risk has lacked a clear definition and this book aims to i) explain the different types of model risk and ii) illustrate these with experiences from the current financial crisis. Examples include model risk related to the economy, stochastic volatility and areas that were previously deemed to be irrelevant or too unrealistic to incorporate into risk models. Thus, the book will provide guidance for regulators and practitioners on how to include model risk in existing risk models and how to evaluate risk models in light of model risk.

Full Product Details

Author:   Daniel Rosch ,  Harald Scheule
Publisher:   Risk Books
Imprint:   Risk Books
ISBN:  

9781906348250

ISBN 10:   1906348251
Pages:   500
Publication Date:   01 February 2010
Audience:   Professional and scholarly ,  Professional & Vocational
Format:   Paperback
Publisher's Status:   Active
Availability:   In Print  
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Table of Contents

Introduction Daniel Rosch and Harald Scheule Section 1: Concepts and Stochastic Frameworks for Model Risk 1 Downturn Model Risk - Another View on the Global Financial Crisis Daniel Rosch and Harald Scheule 2 Follow the Money from Boom to Bust Jorge Sobehart 3 Model Risk and Non-Gaussian Latent Risk Factors Steffi Hose and Stefan Huschens 4 Model Risk in GARCH-type financial time series Corinna Luedtke and Philipp Sibbertsen Section 2: Regulatory Requirements for Model Risk 5 Monetary Policy, Asset Return Dynamics and the General Equilibrium Effect Kuang-Liang Chang, Nan-Kuang Chen and Charles Ka Yui Leung 6 Capitals fall apart: Sensitivity of Economic and Regulatory Capital under Stress Oleg Burd Section 3: Credit Portfolio Risk Models 7 Diversified Asset Portfolio Modeling: Sources and Mitigants of Model Risk Sean Keenan, Andrew Barnes, Stefano Santilli, Sukyul Suh, Colin McColloch and Harry Ma 8 Transmission of macro shocks to loan losses in a deep crisis: The case of Finland Esa Jokivuolle, Oskari Vahamaa and Matti Viren 9 Comparison of credit risk models for portfolios of retail loans based on behavioural scores Lyn C Thomas and Madhur Malik 10 Validating Structural Credit Portfolio Models Michael Kalkbrener and Akwum Onwunta 11 Asymmetric Asset Correlation: Some Implications on the Estimation of Probability of Default Peter Miu and Bogie Ozdemir 12 A Latent Variable Approach to Validate Credit Rating Systems Kurt Hornik, Rainer Jankowitsch, Christoph Leitner, Manuel Lingo, Stefan Pichler and Gerhard Winkler Section 4: Liquidity, Market and Operational risk models 13 Modelling Derivatives Cash Flows in Liquidity Risk Models Stefan Reitz 14 Potential Future Market Risk Manuela Spangler and Ralf Werner 15 Model Risk in Market Risk Modelling Carsten S. Wehn 16 Estimation of Operational Value-at-Risk in the Presence of Minimum Collection Threshold: An Empirical Study Anna Chernobai, Christian Menn, Svetlozar T. Rachev and Stefan Truck 17 Operational Risk and Hedge Fund Performance: Evidence from Australia Robin Luo and Xiangkang Yin Section 5: Risk Transfer and Securitisation Models 18 Identification and classification of Model Risks in Counterparty Credit Risk Measurement Systems Marcus Martin 19 Boosting Systematic Risks with CDOs Martin Donhauser, Alfred Hamerle and Kilian Plank Epilogue Joseph Breeden Index

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Author Information

Daniel Rosch and Harald Scheule Professor Dr Daniel Rosch, Institute of Banking and Finance, Leibniz Universitat Hannover Daniel Rosch is Professor of Finance and Head of the Institute of Banking and Finance at the Leibniz Universitat Hannover. He received a Ph.D. from the University of Regensburg. His work covers a broad range in asset pricing and empirical finance. He has published numerous articles on risk management, credit risk, banking, and quantitative finance in leading international journals and has organized numerous executive training courses on these topics. Dr Harald Scheule, Department of Finance, The University of Melbourne Harald Scheule is teaching Banking and Finance at The University of Melbourne. He has worked globally as a consultant on credit risk, structured finance and securitisation projects for banks, insurance and other financial service companies. He maintains strong research relationships with the Australian, German and Hong Kong regulators for financial institutions. He has extensively published and organized executive training courses in his discipline.

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