The integrated impact of credit and interest rate risk on banks: A dynamic framework and stress testing application

Journal of Banking and Finance

Volumn 34, Issue 4, 2010, Pages 713-729

  Drehmann, Mathias ^a   Sorensen, Steffen ^b   Stringa, Marco ^c  

^a BANK FOR INTERNATIONAL SETTLEMENTS   (Switzerland)

^b Barrie and Hibbert Ltd   (United Kingdom)

^c BANK OF ENGLAND   (United Kingdom)

Author keywords

Asset and liability management; Economic value; Integration of credit risk and interest rate risk; Stress testing

Indexed keywords

EID: 84947648724     PISSN: 03784266     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jbankfin.2009.06.009     Document Type: Article

References (29)

1. Alessandri P., and Drehmann M. An economic capital model integrating credit and interest rate risk. Journal of Banking and Finance 34 (2010) 752-764
2. Altman E., Resti A., and Sironi A. Recovery Risk (2005), Risk Books, London
3. Bank of England, 2005. Inflation Report, February.
4. Barnhill Jr. T.M., and Maxwell W.F. Modelling correlated market and credit risk in fixed income portfolios. Journal of Banking and Finance 26 (2002) 347-374
5. Basel Committee on Banking Supervision, 2006. Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework. Bank for International Settlements, Basel.
6. Basel Committee on Banking Supervision, 2008. Range of Practices and Issues in Economic Capital Modelling: Bank for International Settlements, Basel.
7. Basel Committee on Banking Supervision, 2009. Principles for Sound Stress Testing Practices and Supervision. Bank for International Settlement, Basel.
8. Bliss R., and Kaufman G. US corporate and bank insolvency regimes: a comparison and evaluation. Virginia Law and Business Review 2 (2007) 143-177
9. Bunn P., Cunningham A., and Drehmann M. Stress testing as a tool for assessing systemic risk. Bank of England. Financial Stability Review (2005) 116-126 June
10. Carling K., Jacobson T., Linde J., and Roszbach K. Corporate credit risk modeling and the macroeconomy. Journal of Banking and Finance 31 (2007) 845-868
11. Catarineu-Rabell E., Jackson P., and Tsomocos D.P. Procyclicality and the new Basel Accord - banks' choice of loan rating system. Economic Theory 26 (2005) 537-557
12. Diamond D.W., and Dybvig P.H. Bank runs, deposit insurance and liquidity. Journal of Political Economy 91 (1983) 401-419
13. Diebold F.X., Rudebusch G.D., and Aruoba B. The macroeconomy and the yield curve: a dynamic latent factor approach. Journal of Econometrics 131 (2006) 309-338
14. Drehmann, M., Sorensen, S., Stringa, M., 2008. The Integrated Impact of Credit and Interest Rate Risk on Banks: An Economic Value and Capital Adequacy Perspective. Bank of England Working Paper 339.
15. Duffie D., and Singleton K.J. Credit Risk (2003), Princeton University Press, Princeton
16. Egloff D., Leippold M., and Vanini P. A simple model of credit contagion. Journal of Banking and Finance 31 (2007) 2475-2492
17. Elsinger H., Lehar A., and Summer M. Risk assessment for banking systems. Management Science 52 (2006) 1301-1341
18. Financial Stability Forum, 2008. Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience.
19. Frye J. The effects of systematic credit risk: a false sense of security. In: Altman E.I., Resti A., and Sironi A. (Eds). Recovery Risk (2005), Risk Books, London
20. Haldane, A., Hall, S., Pezzini, S., 2007. A New Approach to Assessing Risks to Financial Stability. Bank of England Financial Stability Paper 2.
21. Hull J. Options, Futures and Other Derivatives (2008), Prentice Hall, Upper Saddle River
22. IFRI - CRO Forum, 2007. Survey on Economic Capital Practice and Applications. The Institute of the Chief Risk Officers (CRO) and International Financial Risk Institute.
23. Jarrow R.A., and Turnbull S.M. The intersection of market and credit risk. Journal of Banking and Finance 24 (2000) 271-299
24. Jobst N.J., Gautam M., and Zenios S.A. Integrating market and credit risk: a simulation and optimisation perspective. Journal of Banking and Finance 30 (2006) 717-742
25. Pagratis S., and Stringa M. Modelling bank credit ratings: a reasoned, structured approach to Moody's credit assessment. International Journal of Central Banking 5 (2009) 1-39
26. Sorge M., and Virolainen K. A comparative analysis of macro stress-testing methodologies with application to Finland. Journal of Financial Stability 2 (2006) 113-151
27. Staikouras S.K. Financial intermediaries and interest rate risk: II. Financial Markets, Institutions and Instruments 15 (2006) 225-272
28. Summer, M., 2008. Modelling instability of banking systems and the problem of macro stress testing. In: ECB Conference Proceedings, Modelling Financial Instability. ECB, Frankfurt.
29. US, 2002. United States Code.