Measuring Integrated Market and Credit Risks in Bank Portfolios: An Application to a Set of Hypothetical Banks Operating in South Africa

50 Pages Posted: 14 Feb 2006

See all articles by Theodore Barnhill

Theodore Barnhill

George Washington University - Department of Finance

Panagiotis Papapanagiotou

George Washington University

Liliana B. Schumacher

International Monetary Fund (IMF) - Asia and Pacific Department; George Washington University - Department of International Business

Date Written: December 2000

Abstract

The banking crises of the 1990s emphasize the need to model the connections between volatility and the potential losses faced by financial institutions due to correlated market and credit risks. We present a simulation model that explicitly links changes in the financial environment and the distribution of future bank capital ratios. This forward-looking quantitative risk assessment methodology allows banks and regulators to identify risks before they materialize and make appropriate adjustments to banks` portfolios. This model was applied to the study of the risk profile of the largest South African banks in the context of the Financial System Stability Assessment (FSSA) (1999).

Keywords: VaR, market risk, credit risk

JEL Classification: G21, G33

Suggested Citation

Barnhill, Theodore and Papapanagiotou, Panagiotis and Schumacher, Liliana, Measuring Integrated Market and Credit Risks in Bank Portfolios: An Application to a Set of Hypothetical Banks Operating in South Africa (December 2000). IMF Working Paper, Vol. , pp. 1-50, 2000. Available at SSRN: https://ssrn.com/abstract=880882

Theodore Barnhill (Contact Author)

George Washington University - Department of Finance ( email )

2023 G Street
Washington, DC 20052
United States

Panagiotis Papapanagiotou

George Washington University

710 21st Street NW
Washington, DC 20052
United States

Liliana Schumacher

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
United States

George Washington University - Department of International Business ( email )

2023 G Street NW
Washington, DC 20052
United States
202-244-3971 (Phone)
202-244-3971 (Fax)

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