Nematrian
/


Measuring and managing market, credit and Op risk [19]

Go to: Summary | Previous | Next   
Bullet points include: VaR may be broken into expected loss and unexpected loss Where Q1-alpha is the (1-alpha)-quantile of the profit (loss) distribution Some argue that banks should just need to hold capital equal to the unexpected loss on their portfolios, since the expected losses are offset by loan spreads over risk-free rates However this (unreasonably?) assumes that banks always set loan spreads ‘correctly’, and also ignores issue of what to do if the ‘expected’ loss for a given cohort changes through time, c.f. non-life insurance reserving

NAVIGATION LINKS
Contents | Prev | Next | ERM Lecture Series

Desktop view | Switch to Mobile