Online Appendix for: Regulatory Capital and Incentives for Risk Model Choice under Basel 3

19 Pages Posted: 14 Aug 2020

See all articles by Fred Liu

Fred Liu

University of Guelph; University of Western Ontario, Department of Economics

Lars Stentoft

Department of Economics, University of Western Ontario; Center for Interuniversity Research and Analysis on Organization (CIRANO); Aarhus University - CREATES

Date Written: July 14, 2020

Abstract

Motivated by the recent changes made to the regulatory environment that governs how banks calculate minimum capital requirements Liu and Stentoft (2020) seek to answer the question of how regulation affect banks’ choice of risk-management models, whether it incentivizes them to use correctly specified models, and if it results in more stable capital requirements. This Online Appendix contain further details on the regulatory calculations, Appendix A, on how to select optimal thresholds for Extreme Value Theory models, Appendix B, on the back-testing methods used for ES, Appendix C, and some additional results, Appendix D and E.

Keywords: Basel 3, Expected Shortfall Back-testing, Regulatory Capital Requirements

JEL Classification: C14, C22, C53, G32

Suggested Citation

Liu, Fred and Stentoft, Lars, Online Appendix for: Regulatory Capital and Incentives for Risk Model Choice under Basel 3 (July 14, 2020). Available at SSRN: https://ssrn.com/abstract=3651459 or http://dx.doi.org/10.2139/ssrn.3651459

Fred Liu

University of Guelph ( email )

50 Stone Road East
Guelph, Ontario N1G 2W1
Canada

University of Western Ontario, Department of Economics ( email )

London, Ontario
Canada

Lars Stentoft (Contact Author)

Department of Economics, University of Western Ontario ( email )

London, Ontario N6A 5B8
Canada

Center for Interuniversity Research and Analysis on Organization (CIRANO)

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

Aarhus University - CREATES

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

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