Japanese banks: tail risk and capital buffers

David E. Allen, Akhmad R. Kramadibrata, Robert J. Powell, Abhay Singh

Research output: Contribution to journalArticleResearchpeer-review

Abstract

This paper applies quantile regression to a structural credit model to investigate the impact of extreme bank asset value fluctuations on capital adequacy and default probabilities (PD) of Japanese Banks. Quantile regression allows modelling of the extreme quantiles of a distribution which allows measurement of capital and PDs at the most extreme points of an economic downturn, when banks are most likely to fail. Outcomes are compared to traditional structural measures. We find highly significant variances in capital adequacy and default probabilities between quantiles, and show how these variances can assist banks and regulators in calculating capital buffers to sustain banks through volatile times.
LanguageEnglish
Pages7-27
Number of pages21
JournalInternational Journal of Business Studies
Volume19
Issue number4
Publication statusPublished - 2011
Externally publishedYes

Fingerprint

Japanese banks
Tail risk
Buffer
Capital adequacy
Quantile
Quantile regression
Fluctuations
Asset value
Probability of default
Economic downturn
Modeling
Credit model
Default probability

Keywords

  • quantile regression
  • Japanese banks
  • probability of default
  • capital adequacy

Cite this

Allen, D. E., Kramadibrata, A. R., Powell, R. J., & Singh, A. (2011). Japanese banks: tail risk and capital buffers. International Journal of Business Studies, 19(4), 7-27.
Allen, David E. ; Kramadibrata, Akhmad R. ; Powell, Robert J. ; Singh, Abhay. / Japanese banks : tail risk and capital buffers. In: International Journal of Business Studies. 2011 ; Vol. 19, No. 4. pp. 7-27.
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Allen, DE, Kramadibrata, AR, Powell, RJ & Singh, A 2011, 'Japanese banks: tail risk and capital buffers', International Journal of Business Studies, vol. 19, no. 4, pp. 7-27.

Japanese banks : tail risk and capital buffers. / Allen, David E.; Kramadibrata, Akhmad R.; Powell, Robert J.; Singh, Abhay.

In: International Journal of Business Studies, Vol. 19, No. 4, 2011, p. 7-27.

Research output: Contribution to journalArticleResearchpeer-review

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