Journal of Risk Model Validation

Worst-case asset, default and survival time correlations

Steffi Höse, Stefan Huschens


The asymptotic single risk factor model is a standard model in the banking industry and is also used in the regulatory framework. In the context of this model, higher correlations do not always lead to higher stress and increased economic capital. Using this fact, worst-case asset, default and survival time correlations less than one are identified, and the concept of the worst-case economic capital is introduced. These worst-case scenarios are important aspects of stress testing, as they build the most adverse stressed scenarios. In an example, the calculation of worst-case correlations and worst-case scenarios for the economic capital are illustrated.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here