nep-rmg New Economics Papers
on Risk Management
Issue of 2025–03–31
six papers chosen by
Stan Miles, Thompson Rivers University
  1. This study evaluates the credit risk of sustainable loans in a preferential capital requirement programme. We utilise loanlevel data from a uniquely implemented programme from Hungary, applying logistic regressions and survival analysis techniques. We observe a significantly reduced credit risk for firms with renewable energy and electromobility loans, even after accounting for all relevant covariates. Models incorporating green characteristics predict a substantially lower credit risk for firms with green loans compared to models excluding green characteristics. These results are economically significant and robust to model specifications, alternative definitions of green firms and varying default definitions. We show that green loans' lower probability of default can justify a reduction of several percentage points in capital requirements. By Balint Vargedo; Csaba Burger; Donat Kim
  2. When defaults cannot be hedged: an actuarial approach to xVA calculations via local risk-minimization By Francesca Biagini; Alessandro Gnoatto; Katharina Oberpriller
  3. Narrow Bracketing and Risk in Games By Fedor Sandomirskiy; Po Hyun Sung; Omer Tamuz; Ben Wincelberg
  4. Bank Capital Regulation in a Zero Interest Environment By Döttling, Robin
  5. Tools for Making Smart Investments in Prevention and Preparedness in Europe By World Bank
  6. Unleashing Adaptive Potential for Social Protection By Francesco Tisei; Malin Ed
  1. By: Balint Vargedo (Magyar Nemzeti Bank (Central Bank of Hungary)); Csaba Burger (Magyar Nemzeti Bank (Central Bank of Hungary)); Donat Kim (Magyar Nemzeti Bank (Central Bank of Hungary))
    Keywords: sustainable finance, financial stability, capital requirement, green finance, default probability, green transition, central bank mandates.
    JEL: E58 G21 G33 O16
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:mnb:wpaper:2025/2
  2. By: Francesca Biagini; Alessandro Gnoatto; Katharina Oberpriller
    Abstract: We consider the pricing and hedging of counterparty credit risk and funding when there is no possibility to hedge the jump to default of either the bank or the counterparty. This represents the situation which is most often encountered in practice, due to the absence of quoted corporate bonds or CDS contracts written on the counterparty and the difficulty for the bank to buy/sell protection on her own default. We apply local risk-minimization to find the optimal strategy and compute it via a BSDE.
    Date: 2025–02
    URL: https://d.repec.org/n?u=RePEc:arx:papers:2502.12774
  3. By: Fedor Sandomirskiy; Po Hyun Sung; Omer Tamuz; Ben Wincelberg
    Abstract: We study finite normal-form games under a narrow bracketing assumption: when players play several games simultaneously, they consider each one separately. We show that under mild additional assumptions, players must play either Nash equilibria, logit quantal response equilibria, or their generalizations, which capture players with various risk attitudes.
    Date: 2025–02
    URL: https://d.repec.org/n?u=RePEc:arx:papers:2502.11243
  4. By: Döttling, Robin
    Abstract: How does the zero lower bound on deposit rates (ZLB) affect how banks respond to capital regulation? I study this question in a model in which households value the liquidity services of deposits yet do not accept negative deposit rates. When deposit rates are constrained by the ZLB, tight capital requirements disproportionately hurt franchise values and are therefore less effective in curbing excessive risk taking. The model delivers a novel rationale for "interest-dependent" capital regulation that is optimally laxer when the ZLB binds and tighter when the ZLB is slack but may bind in the future.
    Date: 2023–12–19
    URL: https://d.repec.org/n?u=RePEc:osf:osfxxx:9dxzf_v1
  5. By: World Bank
    Keywords: Environment-Adaptation to Climate Change Environment-Climate Change Impacts Infrastructure Economics and Finance-Infrastructure Finance Urban Development-Hazard Risk Management Conflict and Development-Disaster Management
    Date: 2024–05
    URL: https://d.repec.org/n?u=RePEc:wbk:wboper:41595
  6. By: Francesco Tisei; Malin Ed
    Keywords: Environment-Adaptation to Climate Change Environment-Climate Change Impacts Social Protections and Labor-Social Protections & Assistance Urban Development-Hazard Risk Management
    Date: 2024–05
    URL: https://d.repec.org/n?u=RePEc:wbk:wboper:41529
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