Risk or Regulatory Capital? Bringing distributions back in the foreground

Dominique Gu�gan () and Bertrand Hassani ()
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Dominique Gu�gan: Department of Economics, University Of Venice C� Foscari and University Paris1 Panth�on � Sorbonne.
Bertrand Hassani: University Paris1 Panth�on � Sorbonne and Grupo Santander.

No 2015:18, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: This paper discusses the regulatory requirement (Basel Committee, ECB-SSM and EBA) to measure financial institutions' major risks, for instance Market, Credit and Operational, regarding the choice of the risk measures, the choice of the distributions used to model them and the level of confidence. We highlight and illustrate the paradoxes and the issues observed implementing an approach over another and the inconsistencies between the methodologies suggested and the goal to achieve. This paper makes some recommendations to the supervisor and proposes alternative procedures to measure the risks.

Keywords: Risk measures - Sub-additivity - Level of confidence - Extreme value distributions - Financial regulation; aggregation. (search for similar items in EconPapers)
JEL-codes: C1 C6 (search for similar items in EconPapers)
Pages: 42 pages.
Date: 2015
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2015:18

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