BCBS WP16

Definition

BCBS WP16 is a document published by the Basel Committee on Banking Supervision on May 2009 in the Market Risk category.

Title

Findings on the interaction of market and credit risk.

Abstract

The distinction between market and credit risk has been blurred by the development of credit risk transfer markets and the broad move to mark-to-market accounting for a wide variety of financial instruments. This has raised questions regarding approaches that treat the two types of risks separately. The financial crisis has illustrated how the two risks may reinforce each other and that in such stress situations illiquidity can exacerbate losses.

The working paper discusses the conceptual distinctions and empirical relationships between market and credit risk. It reviews issues related to aggregation and diversification benefits and discusses how market liquidity affects the relationship between market and credit risk.

Document Profile

• Publication Date: May 2009
• Publication Type: Working Papers
• Publication Status: Current
• Publication Category: Market Risk
• Number of Pages: 31
• Keywords: Credit Risk Measurement, Economic Capital, Credit Risk, Market Risk

See Also

• BIS Website: Web Page
• PDF File: Download

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