Stress Testing for Financial Institutions
First published:
ISBN: 9781906348113
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Basel II-Type Stress Testing of Credit Portfolios
Ferdinand Mager and Christian Schmieder
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
Despite advances in the modelling and management of credit risk during the past two decades, recent market turmoil has shown that credit risk management continues to present unsolved challenges. Prominent among these are how to predict possible but unlikely loss scenarios, such as sudden breakdowns in market mechanisms or violations in modelling assumptions. Stress testing is an important means of detecting weaknesses of a single financial institution and threats to financial stability. The regulatory framework of the Basel II Accord (Basel Committee on Banking Supervision 2006 and European Communities 200622See also the respective national legislation on Basel II.) recognises the relevance of stress tests and constitutes a major catalyst for further development of the technique, particularly for determining credit risk and operational risk for banks and similar financial institutions.
This chapter examines stress testing for credit risk. By using realistic data, a fundamental prerequisite for meaningful stress testing, we seek to contribute to the limited existing literature on this subject (eg, Peura and Jokivuolle 2004 and Rösch and Scheule 200733Earlier contributions to the
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