The Basel Handbook (2nd edition) - Risk Books
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The Basel Handbook (2nd edition)

Edited By Michael K. Ong


Now in its second edition, this bestselling handbook has been fully updated and expanded in light of important changes to the new Basel II Accord such as: the asset classes required under Pillar 1, the new required elements for capital adequacy and the minimum capital requirements for securitization and operational risk, credit risk mitigation, supervisory review and market discipline.

Publish date: 1 Dec 2006

Availability: In stock

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The Basel Handbook (2nd edition)

Book description

Through trial and error, the three pillars have evolved and some of the original ideas have proved to be impractical. This popular handbook methodically identifies the fundamental changes and recent additions to Basel II, such as increased flexibility, risk sensitivity and new OpRisk capital charge. It provides a clear rationale for the revised accord and even covers those elements that are still excluded such as liquidity risk, reputational risk and legal risk.

You are presented with a unique opportunity to learn about every possible consequence of the Basel Accord from global thought leaders and fellow practitioners such as Michael Pykhtin, Steven Zhu, Ashish Dev and Scott D. Aguais amongst many others. You will find yourself referring to this essential handbook on a daily basis and find its clear guidelines essential for rolling out and implementing all systems affected by the Accord’s various regulations.

Looking at the challenges banks face in complying with the new requirements of Basel II, this invaluable title quantifies the potential downstream impact of Basel II on the financial industry. In addition it assesses the degree of constraint the proposals are likely to impose on business and highlights the profound implications of Basel II on:

  • Rating agencies
  • Financial industry
  • Global and local competition
  • Costs and capital

This book is essential reading for any financial practitioner affected by the Basel II accord, including chief financial officers, chief operating officers, chief investment officers, risk managers, credit risk managers, senior compliance officers, and also those working in the fields of operational risk, compliance, regulation, credit, and risk management.

NB. This book replaces The Basel Handbook (1st edition) ISBN 1904339158

Book details

Book 9781904339557 / EBook 9781908823304
Publish date
1 Dec 2006
155mm x 235mm

Editor biography

Michael K. Ong

Dr. Michael K. Ong is currently Professor of Finance at the Stuart School of Business, Illinois Institute of Technology.  He was formerly the Director of the Finance Program and the Executive Director of the Center for Financial Markets. Prior to his retirement from the financial industry, Professor Ong was Executive Vice President and Chief Risk Officer for Credit Agricole Indosuez in New York.  He has enterprise-wide responsibility for all risk management functions for corporate banking, merchant banking, asset management, capital markets activities, and the brokerage division.  He was a member of the Executive Committee.  Before that, he was Head of Enterprise Risk Management for ABN-AMRO Bank, responsible for management information and decision support function for the Executive Committee regarding enterprise-wide market, credit, operational, and liquidity risk, as well as RAROC, ROE, and related optimization models.  Prior to that, Dr. Ong was Head of Corporate Research Unit for First Chicago NBD Corporation. The unit supports the Bank in its global enterprise-wide risk management function – market and credit risk analyses and the allocation of economic capital – and oversees the quantitative research units of the trading areas.  Earlier on, he served as an assistant professor of mathematics at Bowdoin College for seven years with his research specialty in mathematical physics.

He is a member of the Editorial Board of the Journal of Financial Regulation and Compliance, the Journal of Credit Risk, and the Journal of Risk Management for Financial Institutions.  He was the founding editor and Editor-in-Chief of the Journal of Credit Risk, and was on the editorial board of the Journal of RISK and The RMA Journal.  

He is author or editor of the following best-selling books: Internal Credit Risk Models – Capital Allocation and Performance Measurement (Risk Books,1999); Credit Ratings – Methodologies, Rationale and Default Risk (Risk Books, 2002); The Basel Handbook – A Guide for Practitioners (Risk Books, 2004); Risk Management – A Modern Perspective (Elsevier, 2006);The Basel Handbook, 2nd Ed. (Risk Books, 2007).  

Dr. Ong is widely recognized in the financial industry for his work on portfolio credit risk modelling, RAROC, economic capital allocation, operational risk, enterprise risk management, his very active involvement in regulatory issues, and his thoughtful candor on issues affecting the financial industry in general.  

Table of contents


Michael Ong

Section 1: Parameterisation of the Internal Ratings-Based Approach

  • Development and Validation of Key Estimates for Capital Models (Updated)

Michel Araten

  • Correlation in Basel II: Derivation and Evaluation (Updated)

Christian Bluhm and Ludger Overbeck

  • Explaining the Credit Risk Elements in Basel II (Updated)

Simon Hills

  • Loss Given Default and Recovery Risk: From Basel II Standards to Effective Risk Management Tools (Updated)

Andrea Resti and Andrea Sironi

  • Assessing the Validity of Basel II Models in Measuring Risk of Credit Portfolios (New)

Leonid V. Philosophov

  • Measuring Counterparty Credit Risk for Trading Products under Basel II (New)

Michael Pykhtin and Steven Zhu

Section 2: Implementation and Testing of Compliant IRB Systems

  • Implementation of an IRB Compliant Rating System (Updated)

Sebastian Fritz, Michael Luxenburger and Thomas Miehe

  • Stress Tests of Banks’ Regulatory Capital Adequacy: Application to Tier 1 Capital and to Pillar 2 Stress Tests (Updated)

Esa Jokivuolle and Samu Peura

  • Advanced Credit Model Performance Testing to Meet Basel Requirements: How Things Have Changed! (Updated)

Donald R. van Deventer, Xiaoming Wang and Li Li

  • Designing and Implementing a Basel II Compliant PIT-TTC Ratings Framework (Updated)

Scott D. Aguais, Lawrence R. Forest, Jr., Martin King, Marie Claire Lennon and

Brola Lordkipanidze

  • Basel II in the Light of Moody’s KMV Evidence (Updated)

Martti Purhonen

  • Dynamics of Rating Systems - TTC versus PIT (New)

Erik Heitfield

  • Rating and PD Validation (New)

Dirk Tasche

Section 3: Securitisations and Retail Portfolios

  • Basel II Capital Adequacy Rules for Retail Exposures (Updated)

Ashish Dev

  • IRB-Compliant Models in Retail Banking

Richard Norgate

  • Basel II Capital Adequacy Rules for Securitizations (Updated)

Vandana Rao

  • Securitization Issues and Recent Resolutions in Basel II (New)

Ludger Overbeck

Section 4: Regulatory Expectations and Disclosure Issues

  • Regulatory Priorities and Expectations in the Implementation of the IRB Approach (Updated)

Edward Duncan

  • Market Discipline and Appropriate Disclosure in Basel II

Lawrence J. White

  • Validation of Banks’ Internal Rating Systems - A Supervisory Perspective (New)

Stefan Blochwitz and Stefan Hohl

  • Rebalancing the Three Pillars of Basel II (New)

Jean-Charles Rochet

Section 5: Implementing the Advanced Measurement Approach for Operational Risk

  • Implementing a Basel II Scenario-Based AMA for Operational Risk

Ulrich Anders and Gerrit Jan van den Brink

  • Loss Distribution Approach in Practice

Antoine Frachot, Olivier Moudoulaud and Thierry Roncalli

  • An Operational Risk Ratings Model Approach to Better Measurement and Management of Operational Risk (Updated)

Anthony Peccia

Section 6: Loss Database and Insurance

  • Constructing an Operational Event Database

Michael Haubenstock

  • Insurance and Operational Risk (Updated)

John Thirwell


“If you are a regulator or practitioner tasked with implementing Basel II, I can’t imagine you not reading this book.“

Glyn Holton, Contingency Analysis 

“The three pillars of Basel II are a sound structure on which other regulatory models are likely to be built. Early preparation is therefore essential. Michael Ong is one of the few modern risk managers who has held leadership roles in the banking practice and academia. He is widely respected for his work in both fields and has assembled an excellent pool of authors to help banks prepare for Basel II.“

David R. Koenig, Chair, Board of Directors, Professional Risk Managers’ International Association (PRMIA)

“This book is essential reading for Bankers who are serious about reaping the rewards of the Basel II Accord. Michael has done a first-rate job of garnering considered and practical guidance from some of the leading authorities in this complex area.“

Shahram Sharifi, Credit Risk Director, UK Retail Bank, Lloyds TSB Bank Plc

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