Solvency 2 W. Liao

[Something about Credit Derivatives Risks under the Solvency II Regulation]

[December 14, 2008]

Wenchao Liao www.geocities.com/wenchaoliao

*Working Draft. Comments and corrections are greatly appreciated. Please email to [email protected], or call C.201.232.1950.

1

Solvency 2 W. Liao

[PENDING]

2

Solvency 2 W. Liao References

AIG (August 2008). “Economic Capital: August 2008 Update.” AMF, Autorite Des Marches Financiers (Jan. 2009). “AMF 2008 Report on Rating Agencies.” BIS, Basel Committee on Banking Supervision (April 2008). “Cross-sectoral Review of Groupwide Identification and Management of Risk Concentrations.” _______________ (April 2008). “Credit Risk Transfer: Developments from 2005 to 2007.” _______________ (Nov. 2006). “Studies on Credit Risk Concentration.” Working Paper No. 15. _______________ (March 2005). “Credit Risk Transfer.” BIS, Committee on the Global Financial System (July 2008). “Ratings in Structured Finance: What Went Wrong and What Can Be Done to Address Shortcomings?” CGFS Papers, No. 32. _______________ (Jan. 2005). “Stress Testing at Major Financial Institutions: Survey Results and Practice.” Bonti, Gabriel; Michael Kalkbrener; Christopher Lotz; and Gerhard Stahl (2005). “Credit Risk Concentrations Under Stress.” Brunnermeier, Markus K (2009). “Deciphering the Liquidity and Credit Crunch 2007-2008.” Journal of Economic Perspectives, Vol. 23, No. 1. Charles, John; Ming Roest; and Paul Barrett (May 2008). “QIS4 to Benefit from Greater Interest.” Insurance Day 05/28/2008, p.7. Coudert, Virginie and Mathieu Gex (Sept. 2008). “Contagion in the Credit Default Swap Market: The Case of the GM and Ford Crisis in 2005.” CEPII Working Paper. CRO Forum (January 2009). “Internal Models Benchmarking Study: Summary Results.” _______________ (July 2008). “Market Value of Liabilities for Insurance Firms: Implementing Elements for Solvency II.” DBRS (April 2007). “CPDOs Laid Bare: Structure, Risk and Rating Sensitivity.” Economist Intelligence Unit (2008). “From Burden to Benefit: Making the Most of Regulatory Risk Management.” Eling, Martin; Hato Schmeiser; and Joan T. Schmit (March 2007). “The Solvency II Process: Overview and Critical Analysis”. Risk Management and Insurance Review, 10(1): 69-85. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=869267# 3

Solvency 2 W. Liao EMB (Nov. 2008). “QIS4: An Assessment of the Solvency II Landscape.” http://www.emb.com/uk/solvencyII.php EMB (Nov. 2008). “Solvency II – A Short-term Action Blueprint for Senior Management.” http://www.emb.com/uk/solvencyII.php EMB (2008). “Solvency II: Understanding the Directive.” http://www.emb.com/uk/solvencyII.php European Central Bank (July 2007). “Potential Impact of Solvency II on Financial Stability.” https://www.ecb.int/pub/pdf/other/potentialimpactsolvencyiionfinancialstability200707en .pdf European Securitisation Forum (Sept. 2006). “Solvency II Level 1 Directive Recommendations for Insurance Securitisation.” http://www.europeansecuritisation.com/ Fender, Ingo and Martin Scheicher (Sept. 2008). “The ABX: How do the Markets Price Subprime Mortgage Risk?” BIS Quarterly Review. Fender, Ingo; Nikola Tarashev; and Haibin Zhu (March 2008). “Credit Fundamentals, Ratings and Value-at-Risk: CDSs versus Corporate Exposures.” BIS Quarterly Review. Finger, Christopher C. (Feb. 2009). “IRC Comments.” RiskMetrics Research Monthly. Financial Services Authority, UK (Sept. 2008). “Insurance Risk Management: The Path to Solvency II.” FSA Discussion Paper, 08/4. _______________ (2008) “QIS4—Input data required to complete the spreadsheet including key data items to be provided.” Fraunhofer-Chalmers Research Center for Industrial Mathematics (March 2007). “SimIns: An ALM/DFA Modeling Platform.” http://www.fcc.chalmers.se/risk/projects/simins-an-alm-dfa-platform/ Gustafsson, Jim (June 2008). “A Mixing Severity Model Incorporating Three Sources of Data for Operational Risk Quantification.” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1150187 Insurance Times (July 2008), “Deadline Looms for Insurers to Voice Concerns over Solvency II.” http://www.insurancetimes.co.uk/index.asp KPMG (June 2004). “Capital Adequacy: Insurers Play Catch-up.” http://www.kpmg.com.cn/redirect.asp?id=6104 4

Solvency 2 W. Liao Life & Pensions (Nov. 2008). “Some of Life’s Key Lessons.” http://www.towersperrin.com/tp/service-suite.jsp?service=15532&country=global _____________(Nov. 2008). “Capital Motivated Reinsurance Under Solvency II.” McCulloch, Craig (???). “ALM in a Solvency II World.” http://www.actuaries.asn.au/IAA/ Markit (Dec. 2008). Quarterly Metrics Report. http://www.markit.com/information/products/metrics/ OICU-IOSCO (March 2008). “The Role of Credit Rating Agencies in Structured Financial Markets.” Consultation Report. Partner Re (Oct. 2008). “Seven Questions for Your Reinsurers.” http://www.partnerre.com/ Promontory Financial (Jan. 2009). “Stress Testing and Scenario Selection: The New Regulatory Landscape.” PCI, Property Casualty Insurers Association of America (2009). “Systemic Risk Defined.” Risk Magazine (June 2006). “Convergence on Credit.” <== Important!! http://www.risk.net/public/showPage.html?page=332068 Scheicher, Martin (June 2008). “How Has CDO Market Pricing Changed During the Turmoil? Evidence from CDS Index Tranches.” European Central Bank Working Paper No. 910. Tang, Yongjun and Hong Yan (Aug. 2007). “Liquidity and Credit Default Swap Spreads.” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1008325 Towers Perrin (Feb. 2008). “Solvency II: QIS4 Draft Specification.” ____________(May 2008). “Solvency II: Final QIS4 Specification.” ____________(Oct. 2008). “FSA Issues Wake-up Call on Solvency II.” ____________(Oct. 2008). “Embedding ERM—A Tough Nut to Crack: Key Findings from Tower’s Perrin’s 2008 bGlobal ERM Survey of the Insurance Sector.” ____________(Dec. 2008). “Enterprise Risk Management for Insurers.” http://www.towersperrin.com/tp/showhtml.jsp?url=gbr/service-areas/solvencyII/index.htm&country=gbr Wacek, Michael (Jan. 2009). “Derivatives, AIG and the Future of Enterprise Risk Management.” Risk Management: The Current Financial Crisis, Lessons Learned and Future Implications, 5

Solvency 2 W. Liao Society of Actuaries. http://www.soa.org/library/essays/rm-essay-2008-toc.aspx

6

Solvency 2 W. Liao ews Articles Fed Funding Facilities Cadwalader (11/25/2008). Clients Memo: The Commercial Paper Funding Facility (CPFF) Program. Federal Reserve Board (11/25/2008). Press Release and “Term Asset-Backed Securities Loan Facility (TALF) Terms and Conditions”. Mayer Brown (12/04/2008). Securitization Update: US Federal Reserve Announces Programs to Reduce Consumer Borrowing Costs; Extends Earlier Liquidity Measures. NYT (02/22/20009). Banking on the Brink. (by Paul Krugman) WSJ (03/03/2009). ‘Bad Bank’ Funding Plan Starts to Get Fleshed Out. WSJ (03/03/2009). Fed, Treasury Launch TALF Program. WSJ (03/04/2009). The Fed Goes for Brokerage.

AIG AIG News Release (03/02/2009). U.S. Government Provides Support for Contibued Restructuring of AIG. NYT(03/03/2009). A.I.G. Reports $61.7 Billion Loss as U.S. Gives More Aid. WSJ (03/03/2009). U.S. Extends AIG Bailout by Up to $30 Billion. NYT(03/03/2009). A Remake of A.I.G. Is the Goal of Rescue.

Related Others Credit Swiss First Boston (12/11/2001). “Overnight Indexed Swaps.” Sengupta, Rajdeep and Yu Man Tam (2008). “The LIBOR-OIS Spread as a Summary Indicator.” Dallas Fed Economic Synopses, No. 25. LIBORATED (02/04/2009). “’Spread’ the News: The LIBOR-OIS Spread Reveals Banks’ Confidence in the Market.” WSJ (01/23/2009). Swiss Re Needs to Decelerate.

7