TY  - BOOK
ED  - International Monetary Fund.
TI  - Fat-Tails and their (Un)Happy Endings: Correlation Bias and its Implications for Systemic Risk and Prudential Regulation
T2  - IMF Working Papers; Working Paper
SN  - 1455226068 :
SN  - 1018-5941
PY  - 2011///
CY  - Washington, D.C.
PB  - International Monetary Fund
KW  - Basel III
KW  - imf
KW  - Copula Capital Structure Model
KW  - Corporate Finance and Governance: Government Policy and Regulation
KW  - Correlation Bias
KW  - Probability
KW  - Prudential Regulation
KW  - Belgium
KW  - Canada
KW  - Japan
KW  - United Kingdom
KW  - United States
N2  - 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 capital structure model, it is shown that the correlation bias shifts shareholder preferences towards highly correlated assets, making financial institutions more prone to fail and increasing systemic risk given interconnectedness in the financial system. The implications for systemic risk and prudential regulation are assessed under the prism of Basel III, and potential solutions involving changes to the prudential framework and corporate governance are suggested
UR  - http://elibrary.imf.org/view/IMF001/11771-9781455226061/11771-9781455226061/11771-9781455226061.xml
UR  - http://www.imfbookstore.org/IMFORG/9781455226061
ER  -