Template-type: ReDIF-Paper 1.0
Author-Name: Michael McAleer
Author-Person: pmc90 
Author-Workplace-Name: Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam.
Author-Name: Juan-Ángel Jiménez-Martín
Author-Email: juanangel@ccee.ucm.es
Author-Homepage: https://www.ucm.es/fundamentos-analisis-economico2/jajm
Author-Person: pji27 
Author-Workplace-Name: Departamento de Economía Cuantitativa (Department of Quantitative Economics), 
	Facultad de Ciencias Económicas y Empresariales (Faculty of Economics and Business), Universidad 
	Complutense de Madrid
Author-Workplace-Homepage: https://www.ucm.es/fundamentos-analisis-economico2
Author-Name: Teodosio Pérez Amaral
Author-Workplace-Name: Departamento de Economía Cuantitativa (Department of Quantitative Economics), 
	Facultad de Ciencias Económicas y Empresariales (Faculty of Economics and Business), Universidad 
	Complutense de Madrid
Author-Workplace-Homepage: https://www.ucm.es/fundamentos-analisis-economico2
Title: Has the Basel Accord Improved Risk Management During the Global Financial Crisis?
Abstract: The Basel II Accord requires that banks and other Authorized Deposit-taking Institutions (ADIs) communicate 
	their daily risk forecasts to the appropriate monetary authorities at the beginning of each trading day, 
	using one or more risk models to measure Value-at-Risk (VaR). The risk estimates of these models are used 
	to determine capital requirements and associated capital costs of ADIs, depending in part on the number of 
	previous violations, whereby realised losses exceed the estimated VaR. In this paper we define risk 
	management in terms of choosing from a variety of risk models, and discuss the selection of optimal risk 
	models. A new approach to model selection for predicting VaR is proposed, consisting of combining 
	alternative risk models, and we compare conservative and aggressive strategies for choosing between VaR 
	models. We then examine how different risk management strategies performed during the 2008-09 global 
	financial crisis. These issues are illustrated using Standard and Poor’s 500 Composite Index.
Keywords: Value-at-Risk (VaR), daily capital charges, violation penalties, optimizing strategy, risk forecasts, 
	aggressive or conservative risk management strategies, Basel Accord, global financial crisis.
Note: For financial support, the first author wishes to thank the Australian Research Council, National Science 
	Council, Taiwan, and the Japan Society for the Promotion of Science. The second and third authors 
	acknowledge the financial support of the Ministerio de Ciencia y Tecnología and Comunidad de Madrid, Spain.
Classification-JEL: G32, G11, G17, C53, C22.
Length: 33 pages
Creation-Date: 2012 
Revision-Date: 2012-10  
Number: 2012-26 
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1226.txt
File-URL: https://eprints.ucm.es/id/eprint/17043/1/1226.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1226