The integrated impact of credit and interest rate risk on banks: A dynamic framework and stress testing application

Drehmann, Mathias; Sørensen, Steffen; Stringa, Marco

doi:10.1016/j.jbankfin.2009.06.009

Cited by 114 publications

(52 citation statements)

References 18 publications

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“…We can therefore say that, although the action on its liquidity generated a contraction of its interest margin, these actions enabled the bank to reduce the amount of capital absorbed by the interest rate risk. As shown in Drehmann et al (2010), we confirm that a correlation exists between the two risks analysed that does not necessarily implicate a linear relationship, but rather a general dependence.…”

Section: Effects On the Interest Rate Risk Of The Banking Booksupporting

confidence: 77%

“…The studies conducted by Drehmann et al (2010), and Alessandri and Drehmann (2010) are among the first to provide an overall picture of the impact of the interest rate risk and the credit risk on banks' activity. The work by Drehmann et al proposes a general framework for measuring the riskiness of banks, which are subject to correlated interest rate and credit shocks.…”

Section: Literature On the Interest Rate Risk In The Banking Bookmentioning

confidence: 99%

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Liquidity Risk and Interest Rate Risk on Banks: Are They Related?

Baldan

Zen

Rebonato³

2012

SSRN Journal

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Section: Effects On the Interest Rate Risk Of The Banking Booksupporting

confidence: 77%

Section: Literature On the Interest Rate Risk In The Banking Bookmentioning

confidence: 99%

Liquidity Risk and Interest Rate Risk on Banks: Are They Related?

Baldan

Zen

Rebonato³

2012

SSRN Journal

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“…Our analysis is directly related to interest rate risk stress testing, which is discussed by Drehmann et al (2010) and Abdymomunov and Gerlach (2013).…”

Section: Introductionmentioning

confidence: 99%

A Probability-Based Stress Test of Federal Reserve Assets and Income

Christensen

López

Rudebusch

2013

ERWP

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To support the economy, the Federal Reserve amassed a large portfolio of long-term bonds. We assess the Fed's associated interest rate risk-including potential losses to its Treasury securities holdings and declines in remittances to the Treasury. Unlike past examinations of this interest rate risk, we attach probabilities to alternative interest rate scenarios. These probabilities are obtained from a dynamic term structure model that respects the zero lower bound on yields.The resulting probability-based stress test finds that the Fed's losses are unlikely to be large and remittances are unlikely to exhibit more than a brief cessation.JEL Classification: G12, E43, E52, E58.

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“…foreign currency loans. Drehmann, Sorensen, and Stringa (2010) model the assets and liabilities of a representative bank. Their framework allows them to conduct a stress test to analyze the impact to the bank's market and credit risk of simultaneous shocks to property prices, inflation, and exchange rates.…”

mentioning

confidence: 99%

“…Their framework allows them to conduct a stress test to analyze the impact to the bank's market and credit risk of simultaneous shocks to property prices, inflation, and exchange rates. Alessandri and Drehmann (2010) modify the framework of Drehmann et al (2010) to analyze the scope for diversification effects in the banking book. They find that capital requirements calculated from a stand-alone approach to credit and market risk is larger compared to an integrated approach.…”

mentioning

confidence: 99%