An economic capital model integrating credit and interest rate risk in the banking book

Banks typically determine their capital levels by separately analysing credit and interest rate risk, but the interaction between the two is significant and potentially complex. We develop an integrated economic capital model for a banking book where all exposures are held to maturity. Our simulations show that capital is mismeasured if risk interdependencies are ignored: adding up economic capital against credit and interest rate risk derived separately provides an upper bound relative to the integrated capital level. The magnitude of the difference depends on the structure of the balance sheet and on the repricing characteristics of assets and liabilities. JEL Classification: G21, E47, C13asset and liability management, Credit risk, Economic capital, interest rate risk, risk management

An economic capital model integrating credit and interest rate risk in the banking book

Banks typically determine their capital levels by separately analysing credit and interest rate risk, but the interaction between the two is significant and potentially complex. We develop an integrated economic capital model for a banking book where all exposures are held to maturity. Our simulations show that capital is mismeasured if risk interdependencies are ignored: adding up economic capital against credit and interest rate risk derived separately provides an upper bound relative to the integrated capital level. The magnitude of the difference depends on the structure of the balance sheet and on the repricing characteristics of assets and liabilities

The macroeconomic cost of climate volatility

We study the impact of climate volatility on economic growth exploiting data on 133 countries between 1960 and 2019. We show that the conditional (exante) volatility of annual temperatures increased steadily over time, rendering climate conditions less predictable across countries, with important implications for growth. Controlling for concomitant changes in temperatures, a +1oC increase in temperature volatility causes on average a 0.3 per cent decline in GDP growth and a 0.7 per cent increase in the volatility of GDP. Unlike changes in average temperatures, changes in temperature volatility affect both rich and poor countries

Funding Liquidity Risk in a Quantitative Model of Systemic Stability

We demonstrate how the introduction of liability-side feedbacks affects the properties of a quantitative model of systemic risk. The preliminary version of the model, which is still in its development phase, is based on detailed balance sheets for UK banks and encompasses macro-credit risk, interest and non-interest income risk, network interactions, and feedback effects. Funding liquidity risk is introduced by allowing for rating downgrades and incorporating a simple framework in which concerns over solvency, funding profile and confidence may trigger the outright closure of funding markets. In presenting results, we focus on how policymakers could use the model with reference to both aggregate distributions and analysis of a scenario in which large losses at some banks can be exacerbated by liability-side feedbacks, leading to system-wide instability.

Impact of safety-related dose reductions or discontinuations on sustained virologic response in HCV-infected patients: Results from the GUARD-C Cohort

BACKGROUND: Despite the introduction of direct-acting antiviral agents for chronic hepatitis C virus (HCV) infection, peginterferon alfa/ribavirin remains relevant in many resource-constrained settings. The non-randomized GUARD-C cohort investigated baseline predictors of safety-related dose reductions or discontinuations (sr-RD) and their impact on sustained virologic response (SVR) in patients receiving peginterferon alfa/ribavirin in routine practice. METHODS: A total of 3181 HCV-mono-infected treatment-naive patients were assigned to 24 or 48 weeks of peginterferon alfa/ribavirin by their physician. Patients were categorized by time-to-first sr-RD (Week 4/12). Detailed analyses of the impact of sr-RD on SVR24 (HCV RNA <50 IU/mL) were conducted in 951 Caucasian, noncirrhotic genotype (G)1 patients assigned to peginterferon alfa-2a/ribavirin for 48 weeks. The probability of SVR24 was identified by a baseline scoring system (range: 0-9 points) on which scores of 5 to 9 and <5 represent high and low probability of SVR24, respectively. RESULTS: SVR24 rates were 46.1% (754/1634), 77.1% (279/362), 68.0% (514/756), and 51.3% (203/396), respectively, in G1, 2, 3, and 4 patients. Overall, 16.9% and 21.8% patients experienced 651 sr-RD for peginterferon alfa and ribavirin, respectively. Among Caucasian noncirrhotic G1 patients: female sex, lower body mass index, pre-existing cardiovascular/pulmonary disease, and low hematological indices were prognostic factors of sr-RD; SVR24 was lower in patients with 651 vs. no sr-RD by Week 4 (37.9% vs. 54.4%; P = 0.0046) and Week 12 (41.7% vs. 55.3%; P = 0.0016); sr-RD by Week 4/12 significantly reduced SVR24 in patients with scores <5 but not 655. CONCLUSIONS: In conclusion, sr-RD to peginterferon alfa-2a/ribavirin significantly impacts on SVR24 rates in treatment-naive G1 noncirrhotic Caucasian patients. Baseline characteristics can help select patients with a high probability of SVR24 and a low probability of sr-RD with peginterferon alfa-2a/ribavirin

Equity prices, consumption and investment : an empirical investigation

EThOS - Electronic Theses Online ServiceGBUnited Kingdo

European and Euro-meditterranean Agreements: same simulation analysis on the effects of the EU trade policy

This paper deals with the long term effects of several important trade policy initiatives implemented by the EU in the last decade: the European Agreements, the Euro-Mediterranean Agreements and the Customs Union with Turkey. The analytical tool is GTAP, a static and perfectly competitive CGE model whose database has been aggregated into 10 regions and 10 industries. On average, liberalisation of manufacturing industries turns out to be welfare creating for the subscribers and slightly damaging for the world economy; the eventual opening of agricultural markets by the EU would improve these results. Income distribution inside the involved areas is only weakly affected by integration; with regard to the EU, return to capital and wages – for both skilled and unskilled labour - tend to appreciate in real terms.CGE modelling; European enlargement; Free trade agreements