Under the current regulatory regime for insurance undertakings, Solvency I, the required capital margin does not depend on the allocation of investments, i.e. it is not sensitive to market risk arising from the volatility of market prices for e.g. equity, bond or real estate investments. To improve the protection of policyholders and create a unified regulatory regime in all countries of the European Economic Area (EEA), a risk-sensitive, forward-looking and principle-based regulatory accord for insurance undertakings called Solvency II will replace the current regime by 01.01.2016. Unlike Solvency I, Solvency II requires the backing up of any investment in risky assets with risk capital rather than imposing investment limits. Own funds eligible to cover the solvency capital requirements under Solvency II shall be based on the difference of market-consistently valuated assets and liabilities in the Solvency II balance sheet. In this thesis, I first summarize academic contributions as well as opinions from industry representatives on the expected consequences of the current calibration of the Solvency II standard formula. The accuracy of the calibration itself is another focal point of this work. This work contains four scientific papers. The first paper examines the presence of contagion effects between Eurozone countries in the period 2008-2012. In a market-consistent valuation approach like Solvency II contagion effects intensify the volatility of own funds and therefore of the solvency ratio of insurers. The intensity of contagion peaked in 2010 and first half of 2011 but decreased subsequently which is likely to be a consequence of bailout measures by the EU and the IMF and ECB interventions. The second and third paper address the zero risk charge for sovereign debt issued by EU member states assumed under the Solvency II standard formula. If one accepts German bond yields to be a risk-free asset, using modern cointegration techniques I showed that bonds of only one third of EU member countries can be perceived as risk-free as well. The fourth paper provides evidence for convergence in the shock-response-behavior of the stock indices of Germany, UK and France during the past decades, which in turn indicates support for the assumption of a perfect tail correlation between listed equity in the Solvency II standard formula.

The main contribution of the diploma thesis is to give a comprehensive picture of the switch from LIBOR to OIS discounting. Prior to the global financial crisis, LIBOR (London Interbank Offered Rate) represented an approximation of the risk-free rate in the valuation of interest rate derivatives. The collapse of Lehman Brothers in 2008 resulted in sharp widening of the LIBOR-OIS spread, an indicator of the interbank market stress. Many derivative practitioners have become concerned about the choice of an appropriate risk-free rate. Traditional valuation approaches using LIBOR discounting have been reviewed. Meanwhile, the OIS (Overnight Indexed Swap) rate has become a better proxy for the risk-free rate, at least for collateralized or centrally cleared transactions. Firstly, the research aims to discover the divergences between LIBOR rates, popular pre-crisis proxies for the riskfree rate, and OIS rates, their post-crisis alternatives. Secondly, it covers the interbank lending market, and analyzes individual LIBOR-OIS spreads for the USD, EUR, GBP and CZK currency. Thirdly, it explores the transition to OIS discounting in connection with an influence on a wide spectrum of interest rate derivatives. Therefore, any potential effects are demonstrated on numerical valuation examples of interest rate swaps in the USD, EUR, and GBP currency. Finally, the diploma thesis addresses a topic of collateral management and clarifies different approaches using LIBOR or OIS rates for collateralized or non-collateralized transactions.

Under the current regulatory regime for insurance undertakings, Solvency I, the required capital margin does not depend on the allocation of investments, i.e. it is not sensitive to market risk arising from the volatility of market prices for e.g. equity, bond or real estate investments. To improve the protection of policyholders and create a unified regulatory regime in all countries of the European Economic Area (EEA), a risk-sensitive, forward-looking and principle-based regulatory accord for insurance undertakings called Solvency II will replace the current regime by 01.01.2016. Unlike Solvency I, Solvency II requires the backing up of any investment in risky assets with risk capital rather than imposing investment limits. Own funds eligible to cover the solvency capital requirements under Solvency II shall be based on the difference of market-consistently valuated assets and liabilities in the Solvency II balance sheet. In this thesis, I first summarize academic contributions as well as opinions from industry representatives on the expected consequences of the current calibration of the Solvency II standard formula. The accuracy of the calibration itself is another focal point of this work. This work contains four scientific papers. The first paper examines the presence of contagion effects between Eurozone countries in the period 2008-2012. In a market-consistent valuation approach like Solvency II contagion effects intensify the volatility of own funds and therefore of the solvency ratio of insurers. The intensity of contagion peaked in 2010 and first half of 2011 but decreased subsequently which is likely to be a consequence of bailout measures by the EU and the IMF and ECB interventions. The second and third paper address the zero risk charge for sovereign debt issued by EU member states assumed under the Solvency II standard formula. If one accepts German bond yields to be a risk-free asset, using modern cointegration techniques I showed that bonds of only one third of EU member countries can be perceived as risk-free as well. The fourth paper provides evidence for convergence in the shock-response-behavior of the stock indices of Germany, UK and France during the past decades, which in turn indicates support for the assumption of a perfect tail correlation between listed equity in the Solvency II standard formula.

Risk measurement tools and strategies have until recently been calibrated for a low-for-long interest rate environment. However, in the current higher interest rate environment, banking supervisory entities have intensified their regulatory pressure on institutions to enhance their assessment and monitoring of interest rate risk and credit spread risk. The European Banking Authority (EBA) has released updated guidelines on the assessment and monitoring of Credit Spread Risk in the Banking Book (CSRBB), which will replace the current guidelines by 31st December 2023. The new guidelines identify the CSRBB as a separate risk category apart from Interest Rate Risk in the Banking Book (IRRBB), and specifies the inclusion of liabilities in therisk calculations. This paper proposes a CSRBB model that conforms to the updated EBA guidelines. The model uses a historical simulation Value at Risk (HSVaR) and Expected Shortfall (ES) approach, and includes a 90-day holding period, as suggested by Finansinspektionen (FI). To assess the effectiveness of the model, it is compared with a standardised model of FI, and subjected to backtesting. Additionally, the paper suggests modifications to the model to obtain more conservative results. / Riskmätningsverktyg och strategier har sedan nyligen anpassats till en lågräntemiljö. Dock till följd av den nuvarande högre räntemiljön har tillsynsmyndigheter för bankväsendet satt ökat tryck på institutioners utvärdering och rapportering av ränterisk och kreditspreadrisk. Den Europeiska Bankmyndigheten (EBA) har publicerat uppdaterade riktlinjer för bedömning och rapportering av kreditspreadsrisken i bankboken (CSRBB), som ersätter de nuvarande riktlinjerna den 31 december 2023. De nya riktlinjerna identifierar CSRBB som en separat riskkategori från ränterisk i bankboken (IRRBB) och specificerar inkluderingen av skulder i riskberäkningarna. Denna uppsats föreslår en CSRBB-modell som följer EBAs uppdaterade riktlinjer. Modellen använder en Value at Risk (VaR) metodik baserat på historiska simulationer och Expected Shortfall (ES), samt antar en 90-dagars innehavsperiod som föreslås av Finansinspektionen (FI). Modellens effektivitet utvärderas genom en jämförelse med FIs standardmodell för kreditspreadrisken i bankboken, samt genom backtesting. Slutligen diskuteras möjliga justeringar av modellen för att uppnå mer konservativa resultat.