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Risks 2014, 2(1), 25-48; doi:10.3390/risks2010025

An Academic Response to Basel 3.5

RiskLab and SFI, Department of Mathematics, ETH Zurich, Zurich 8092, Switzerland
School of Economics and Management, University of Firenze, Firenze 50127, Italy
Department of Mathematical Stochastics, University of Freiburg, Freiburg 79104, Germany
Department of Statistics and Actuarial Science, University of Waterloo, Waterloo, ON N2L 3G1, Canada
Author to whom correspondence should be addressed.
Received: 25 November 2013 / Revised: 9 February 2014 / Accepted: 17 February 2014 / Published: 27 February 2014
(This article belongs to the Special Issue Risk Management Techniques for Catastrophic and Heavy-Tailed Risks)
View Full-Text   |   Download PDF [375 KB, uploaded 27 February 2014]


Recent crises in the financial industry have shown weaknesses in the modeling of Risk-Weighted Assets (RWAs). Relatively minor model changes may lead to substantial changes in the RWA numbers. Similar problems are encountered in the Value-at-Risk (VaR)-aggregation of risks. In this article, we highlight some of the underlying issues, both methodologically, as well as through examples. In particular, we frame this discussion in the context of two recent regulatory documents we refer to as Basel 3.5. View Full-Text
Keywords: Basel 3.5; risk-weighted assets; Value-at-Risk; expected shortfall; model uncertainty; robustness; backtesting Basel 3.5; risk-weighted assets; Value-at-Risk; expected shortfall; model uncertainty; robustness; backtesting
This is an open access article distributed under the Creative Commons Attribution License (CC BY 3.0).

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MDPI and ACS Style

Embrechts, P.; Puccetti, G.; Rüschendorf, L.; Wang, R.; Beleraj, A. An Academic Response to Basel 3.5. Risks 2014, 2, 25-48.

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