This paper investigates the accuracy of internal rating based (IRB) models in measuring credit risk. We contribute to the growing debate on the current prudential regulatory framework by investigating the use of validated IRB models in promoting efficient risk management practises. Our empirical analysis is based on a novel panel data set of 177 Western European banks observed from 2008 to 2015, in the aftermath of the financial and economic crisis. We find that IRB banks were able to curb the increase in credit risk driven by the macroeconomic slowdown better than banks under the standardized approach. This suggests that the introduction of the internal ratings based approach by Basel II has promoted the adoption of stronger risk management practices among banks, as meant by the regulators.
This paper advocates the use of long-memory multivariate GARCH models to forecast spot return volatilities and correlations for crude oil and related products. The findings show from a risk management perspective that the multivariate models incorporating long-memory features outperform the short-memory counterparts in providing the most accurate Value-at-Risk measures. The paper provides useful insights to non-commercial oil traders and other energy markets agents engaged in hedging and risk management operations.
This is the accepted version of the paper.This version of the publication may differ from the final published version.Permanent repository link: https://openaccess.city.ac.uk/id/eprint/22694/ Link to published version: http://dx. AbstractThis paper investigates the accuracy of internal rating based (IRB) models in measuring credit risk. We contribute to the growing debate on the current prudential regulatory framework by investigating the use of validated IRB models in promoting efficient risk management practises. Our empirical analysis is based on a novel panel data set of 177 Western European banks observed from 2008 to 2015, in the aftermath of the financial and economic crisis. We find that IRB banks were able to curb the increase in credit risk driven by the macroeconomic slowdown better than banks under the standardized approach. This suggests that the introduction of the internal ratings based approach by Basel II has promoted the adoption of stronger risk management practices among banks, as meant by the regulators. Ref: R&R Review of "Credit risk in European banks: The bright side of the IRB approach" Ms. Ref. No.: JBF-D-17-00246Dear Reviewer #2, Thank you for your attentive reading of the paper and for your further comments. We are happy that you appreciate our efforts to follow your guidance. We are very grateful for your suggestions and we have tried to implement as many as we could in this latest version of the paper.In what follows we explain how we revised the paper on the base of your comments, highlighting the major changes with respect to its previous version. We also discuss how we accounted for those comments that we could not investigate directly due to data availability.We wish to thank you very much for guiding us through this extensive revision process and particularly for directing our efforts towards a justifiable econometric approach to support our findings. Best regards, The AuthorsAbstract This paper investigates the accuracy of internal rating based (IRB) models in measuring credit risk. We contribute to the growing debate on the current prudential regulatory framework by investigating the use of validated IRB models in promoting efficient risk management practises. Our empirical analysis is based on a novel panel data set of 177 Western European banks observed from 2008 to 2015, in the aftermath of the financial and economic crisis. We find that IRB banks were able to curb the increase in credit risk driven by the macroeconomic slowdown better than banks under the standardized approach. This suggests that the introduction of the internal ratings based approach by Basel II has promoted the adoption of stronger risk management practices among banks, as meant by the regulators.
Purpose Economic studies have always underlined the cyclical trends of many industries and their different relations to the macro-economic cycles. Shipping is one of those industries and it has been often characterised by peaks that have influenced both the trade patterns and industry investment structure (e.g. fleet, shipyard activity, freight rates). One of the main issues related with the cycles is the effect on overcapacity and prices for newbuilding and how the understanding of these patterns can help in preventing short-hand strategies. The purpose of this paper is to evaluate different effects of business elements on shipbuilding activity, in relation to different economic-cycle phases. Design/methodology/approach This paper proposes a non-linear econometric model to identify the relations between shipbuilding and economic cycles over the past 30 years. The research focuses on identifying the cycle characteristics and understanding the asymmetrical effect of economic- and business-related variables on its development. Findings The study underlines the presence of an asymmetric effect of several business variables on the shipbuilding productions, depending on the cyclical phases (i.e. market expansion or economic slowdown). Moreover, lagged effects seem to be stronger than contemporaneous variables. Originality/value The paper is a first attempt of using non-linear modelling to shipbuilding cycles, giving indications that could be included in relevant investment policies.
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