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Scenario Based Enterprise Capital Models - Why Banks are Under-Capitalized

I understand this is paper 2 in a series of 3; paper one is being completed by Professor McNeil and will be a the key contribution to a REvolution in thinking about Economic Capital which does seem to progressing right now.

Abstract: (of the paper referred here)

The concept of economic capital is clear; it is the capital charge that a financial institution (bank or insurance company) requires in order to limit the probability of bankruptcy to a given confidence level over a… Continue

Added by John A Morrison on January 26, 2009 at 5:30am — No Comments

Basel II in Switzerland 9th January 2009 update

In Switzerland the EBK ( is entrusted with (Basel II) implementation. Under its leadership a mixed national working group, made up of representatives of all relevant interest groups in the Swiss financial industry, is working out the appropriate Swiss legal regulatory standards. In Switzerland all the menu approaches offered by Basel II are being implemented, and are therefore in principle available to every institute.…


Added by John A Morrison on January 26, 2009 at 5:30am — No Comments

Gillian Tett on Davos in the Financial Times

Gillian Tett has not written anything under her own byline in the Financial Times since November last year and before that her contributions were unfortunately sparse. She has moved up the ladder in the FT recently, finally acknowledged for all her great reporting on the phases of the Credit Crisis from the summer of 2007 (yes!). She was the first journalist to truly acknowldege it was happening and was in the thick of it during the horrible moments of Central Bank liquidity pumps and Sunday… Continue

Added by John A Morrison on January 26, 2009 at 1:00am — No Comments

The Prediction Lover's Handbook MIT Sloan School

Nice overview of the perspective of both of these well regarded academics on the subject of Prediction, where its at right now, Sloan Management Review is usually well ahead of the curve. You have to register to see this but I would recommend that you do. As a second-degree stundent SMR almost did my degree for me, in part!

The Prediction Lover’s Handbook

By Thomas H. Davenport and Jeanne G. Harris

January 7, 2009

Assessment tools for better-informing… Continue

Added by John A Morrison on January 26, 2009 at 12:30am — No Comments

Quantitative Analytics in Banking: How do we get the Heads Out of the Sand

The press has got onto thinking about what is wrong with banking right now, it has taken a crisis to get them to focus. It has taken a crisis to bring the banks and their supervisors closer together, sharing a common objective and that at the very least is one good thing to evolve from this crisis. Supervisors and senior Bankers are at least on adjacent pages. But that is only in terms of the regulatory and transparency requirements, the theory, the jurisprudence if you will. It will take the… Continue

Added by John A Morrison on January 25, 2009 at 12:30am — No Comments

The quill pen and asymptotic approximation -

This is a really important article from the august "Daily Telegraph" in the UK, it describes the process being undertaken right now to quantify a value for the structured products held off or on balance sheet by the UK banks, it focuses on the biggest and most controversial of the UK banks which WAS a player in this market game, RBOS for whose executives and ex-executives the UK press are beginning to sniff the opportunity for blood!…


Added by John A Morrison on January 24, 2009 at 11:00pm — 1 Comment

Agile Business Intelligence

Agile Business Intelligence (BI):

by Kesavan Hariharasubramanian

The aim of any Business Intelligence (BI) initiative is to help an organization to review its business, its competition and its external environment from time to time and take more smarter and faster decisions not only for survival and sustenance but also to stay one step ahead of its competition. Or in other words, BI serves to keep an organization agile and vigilant at the same… Continue

Added by Kesavan Hariharasubramanian on January 23, 2009 at 3:34am — 2 Comments

1st post: analysing AnalyticBridge

I am sure many of you know of Many years ago most people got annoyed with Alexa as it's toolbar was budled with some freeware. It was just considered as malware. It was not until two years ago when I needed to analyse which real estate companies from the Algarve were the most popular on the Web when I realised that it could be useful sometimes.

This is what Alexa has to say about AnalyticBridge: has a traffic rank of:… Continue

Added by Peter Lindmark on January 18, 2009 at 4:12am — 4 Comments

Basel Committee Trading Book Requirements ”Revision Proposals”

The consultative papers Revisions to the Basel II market risk framework and Guidelines for computing capital for incremental risk in the trading book set out the Committee's proposed enhancements to the regulatory capital treatment for trading book exposures. Collectively, these are referred to as the "trading book proposals".

The Committee therefore proposes to require banks to calculate a stressed VaR taking into account a one-year observation period relating to significant losses,… Continue

Added by John A Morrison on January 18, 2009 at 4:00am — 3 Comments

Proposed enhancements to the Basel II framework

The Basel Committee has proposed this weekend root and branch, fundamental revisions of the Basel II Framework in all three pillars Pillar 1 (minimum capital requirements), Pillar 2 (supervisory review process) and the third pillar (market discipline); reflecting particular concern about the trading book, ABCP Conduits, Structured Products and more particularly Banking Supervision (as opposed to regulation). The impacts of the proposed changes to Pillar 3 (Disclosure) look unusually interesting… Continue

Added by John A Morrison on January 18, 2009 at 3:00am — No Comments

A missing link in the transmission mechanism?


A missing link in the transmission mechanism?

by Claudio Borio and Haibin Zhu, Bank for International Settlements

Over the last three decades the financial landscape has gone through radical structural change. As a result of financial liberalisation and innovation, heavily controlled, segmented and “sleepy” domestic financial… Continue

Added by John A Morrison on January 16, 2009 at 3:00am — No Comments

Emotions, Beliefs and Analytics

(From lifeanalytics)

When i first came across Data Mining and Machine Learning in 1997 i had no idea of the kind of applications that this field can have. As time passes by, the knowledge that can be available to a data/text miner becomes more and more a serious business....actually, a very serious one.

Not long time ago i have seen a presentation where a map of emotions from the web was created in real time by aggregating… Continue

Added by Themos Kalafatis on January 12, 2009 at 7:48am — No Comments

Stress testing credit risk: a survey of authorities' approaches

by Antonella Foglia, Banca d’Italia, Banking and Financial Supervision

This paper reviews the quantitative methods developed at selected authorities for stress testing credit risk, focusing in particular on the methods used to link macroeconomic drivers of stress with bank-specific measures of credit risk (macro stress test). Authorities with a mandate for financial stability are particularly interested in quantifying the macro-to-micro linkages and have developed specific modeling… Continue

Added by John A Morrison on January 12, 2009 at 3:00am — No Comments

SAP White Paper on a Solution Architecture for Economic Capital Quantitative Analytics, pre Credit Crunch

John A Morrison developed a comprehensive White Paper for SAP, published in April 2006, pre-credit crunch, on the topic of a Solution Architecture for Economic Capital Quantitative Analytics; Basel II Pillar 2 (B2P2). This prescient WP pointed out then, that the reality of banking quantitative risk capital analysis was the reverse of the way it seemed, the shadow banking tail was wagging the main street lending dog and to quantify risk capital properly (as required by the now effectively… Continue

Added by John A Morrison on January 11, 2009 at 3:00am — No Comments

Data regression analysis

People will obtain many relating data of two or more than two dimension during experiments and production. These data will help them to solve problems of reality on contrary, which need data processing to make them become mathematicalematical model reflecting the data variation regulation. The application of the Least Square Method can only make linear regression, but to the nonlinear problems it must construct relating mathematicalematical relationship expression, namely mechanism model… Continue

Added by yanping on January 10, 2009 at 8:50pm — No Comments

Stress testing banks'credit risk using mixture vector autoregressive models

Prepared by Tom Pak-wing Fong, Research Department, Hong Kong Monetary Authority and Chun-shan Wong, Department of Finance, The Chinese University of Hong Kong

This paper estimates macroeconomic credit risk of banks’ loan portfolio based on a class of mixture vector autoregressive models. Such class of models can differentiate distributions of default rates and macroeconomic conditions for different market situations and can capture their dynamics evolving over time, including the… Continue

Added by John A Morrison on January 9, 2009 at 3:00am — No Comments

Article about R in NY Times

R first appeared in 1996, when the statistics professors Robert Gentleman, left, and Ross Ihaka released the code as a free software package.


Published: January 6, 2009

To some people R is just the 18th letter of the alphabet. To others, it’s the rating on racy movies, a measure of an attic’s insulation or what pirates in movies say.

R is also the name of a popular programming language used by a growing number of data analysts inside… Continue

Added by Vincent Granville on January 7, 2009 at 11:00am — No Comments

Going From a Theory of Error to a Web Analytics Process

By Gary Angel

My post on “Numbers it’s better NOT to know” got me thinking more closely about the relationship between a theory of error and the types of web analytic process organizations should adopt. That led to a more considered post “Defending the Indefensible” where I laid out some of the most common causes of error and talked a little bit about how these errors should influence our thinking about organization and process. Jacques Warren, whose comments certainly triggered some… Continue

Added by Vincent Granville on December 26, 2008 at 6:30pm — 1 Comment

Process Excellence Network

Hi, my name is Steven Bonacorsi and a Lean Six Sigma Master Black Belt. I would like to add you to my professional network

Let me know if I can be of any assistance to you and your business.

Join the Process Excellence Network…


Added by Steven Bonacorsi on December 18, 2008 at 1:00pm — No Comments

Bayesian Networks for Structured Equation Modeling


I am looking for tools/approach/... on how to use bayesian networks in Structured Equation Modeling.
Any suggestions on articles/books to refer?


Added by Manjula on December 9, 2008 at 11:30pm — 2 Comments

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