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

Author

Listed:
  • Panagiotis Papapanagiotou
  • Mr. Theodore M. Barnhill
  • Miss Liliana B Schumacher

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).

Suggested Citation

  • Panagiotis Papapanagiotou & Mr. Theodore M. Barnhill & Miss Liliana B Schumacher, 2000. "Measuring Integrated Market and Credit Risks in Bank Portfolios: An Application to a Set of Hypothetical Banks Operation in South Africa," IMF Working Papers 2000/212, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2000/212
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    Citations

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    Cited by:

    1. Marco Sorge, 2004. "Stress-testing financial systems: an overview of current methodologies," BIS Working Papers 165, Bank for International Settlements.
    2. Sorge, Marco & Virolainen, Kimmo, 2006. "A comparative analysis of macro stress-testing methodologies with application to Finland," Journal of Financial Stability, Elsevier, vol. 2(2), pages 113-151, June.
    3. Martin Cihak, 2004. "Stress Testing: A Review of Key Concepts," Research and Policy Notes 2004/02, Czech National Bank.
    4. Mr. Armando Méndez Morales & Jose Giancarlo Gasha, 2004. "Identifying Threshold Effects in Credit Risk Stress Testing," IMF Working Papers 2004/150, International Monetary Fund.
    5. Jianping Li & Jichuang Feng & Xiaolei Sun & Minglu Li, 2012. "Risk Integration Mechanisms And Approaches In Banking Industry," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 11(06), pages 1183-1213.

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