Fat-Tails and their (Un)Happy Endings : Correlation Bias and its Implications for Systemic Risk and Prudential Regulation »
Series: IMF Working Papers
Author(s): International Monetary Fund
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 01 April 2011
Keywords: Basel III, correlation bias, copula capital structure model, prudential regulation, systemic risk., correlation, subordinated debt, banking, probability, General Financial Markets: Government Policy and Regulation
The correlation bias refers to the fact that claim subordination in the capital structure of the firm influences claim holders' preferred degree of asset correlation in portfolios held by the firm. Using the copula...