Stress Testing for Financial Institutions
First published:
ISBN: 9781906348113
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Stress-Testing Credit Value-at-Risk: a Multiyear Approach
Alfred Hamerle, Rainer Jobst, Michael Knapp and Matthias Lerner
Integrating Stress-Testing Frameworks
Stress Tests, Market Risk Measures and Extremes: Bringing Stress Tests to the Forefront of Market Risk Management
Credit Cycle Stress Testing Using a Point-in-Time Rating System
Stress-Testing Credit Value-at-Risk: a Multiyear Approach
Stress Testing the Impact of Group Dependence on Credit Portfolio Risk
Hedge the Stress: Using Stress Tests to Design Hedges for Foreign Currency Loans
Survey of Retail Loan Portfolio Stress Testing
Stress Tests for Retail Loan Portfolios
Stress-Testing Banks’ Credit Risk Using Mixture Vector Autoregressive Models
Uncertainty, Credit Migration, Stressed Scenarios and Portfolio Losses
Worst-Case and Stressed Correlations in the Asymptotic Single Risk Factor Model
Risk Aggregation, Dependence Structure and Diversification Benefit
Stress-Testing Credit Distributions of Banks’ Portfolios: Risk Structure and Concentration Issues
Time-Varying Correlations for Credit Risk: Modelling, Estimating and Stress Testing
Macro Model-Based Stress Testing of Basel II Capital Requirements
Risk Tolerance Concepts and Scenario Analysis of Bank Capital
Basel II-Type Stress Testing of Credit Portfolios
The relevance of forecasting future credit losses for loan portfolios under stressed scenarios is emphasised not only by current developments in the credit markets, such as the subprime crisis in the US and its impact on the global financial system. In Pillar II the new regulatory framework (Basel II) also demands sound stress-testing processes (see the Basel Committee on Banking Supervision 2004, paragraph 55 or the Committee of European Banking Supervision 2006).
A survey by the Committee on the Global Financial System (of the Bank for International Settlements) found that stress tests in loan books are done separately and infrequently compared to stress tests in trade books. The stressed scenarios focus on loan-related variables, such as the probability of default (PD) or recovery rate, and are often underpinned by a shock to macroeconomic variables (see the Committee on the Global Financial System 2005, p. 12). Here, mostly fixed, stressed scenarios are set in the literature available.11Compare to, eg, Pesaran et al (2005) or Hoeberichts et al (2006). For an overview of different stress tests of central banks, compare to Richter (2006). Simons and Rolwes (2008) show that such
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