Interactions between Credit and Market Risk, Diversification vs Compounding effects

Martin Andres Szybisz

MPRA Paper from University Library of Munich, Germany

Abstract: The relations between credit and market risk have deep roots in financial and economic theory. After a brief theory review, we select five variables and calculate their historical shortfalls. This shortfall is taken as a proxy for market risk quantification. Relating this shortfall to non performing loans as a proxy for credit risk allows us to study the nature of the relation between credit and market risk. The nonlinearity of the relation is discussed in view of diversification and compounding effects.

Keywords: Credit risk; Market risk; Aggregation; Diversification; Compounding effect (search for similar items in EconPapers)
JEL-codes: D81 E44 G21 (search for similar items in EconPapers)
Date: 2019-04-09
New Economics Papers: this item is included in nep-fmk and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/93173/1/MPRA_paper_93173.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:93173

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().