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Has the Basel II Accord Encouraged Risk Management During the 2008-09 Financial Crisis?
Company: Kyoto Institute of Economic Research
Year Of Publication: 2012
Month Of Publication: November
Pages: 34
Download Count: 23
View Count: 2011
Comment Num: 0
Language: English
Source: working paper
Who Can Read: Free
Date: 3-31-2010
Publisher: Administrator
Summary
The Basel II Accord requires that banks and other Authorized Deposit-taking
Institutions (ADIs) communicate their daily risk forecasts to the appropriate monetary
authorities at the beginning of each trading day. The risk estimates of these models are used to determine capital requirements and associated capital costs of ADIs, depending in part on the number of previous violations, whereby realised losses exceed the estimated VaR. In
this paper we define risk management in terms of choosing sensibly from a variety of risk models, and discuss the selection of optimal risk models. A new approach to model selection for predicting VaR is proposed, consisting of combining alternative risk models, and comparing conservative and aggressive strategies for choosing between VaR models. We then examine how different risk management strategies performed during the 2008-09 financial crisis.
Discussion paper No. 832
This document is published in North American Journal of Economics and Finance,
http://dx.doi.org/10.1016/j.najef.2013.02.004
Author(s)
McAleer, Michael Sign in to follow this author
Jimenez-Martin, Juan-Angel Sign in to follow this author
Pérez-Amaral, Teodosio Sign in to follow this author
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