FVA, correlation, wrong-way risk: EU stress test’s hidden gems

How much margin is missing in sovereign swaps? The stress test had the answer

italy-s-ministry-of-economy-and-finance
Italy's MInistry of Economy and Finance

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There is a wealth of data in the EU-wide stress test results published on October 26, but only one number made the headlines – the 25 banks that failed to meet a 5.5% minimum Tier I capital ratio under the test's worst-case scenario. The other 105 banks in the exercise were more or less ignored, as were most of the up-to-12,000 data points each bank disclosed.

But the neglected data contains a host of fascinating details – some packing a real punch. For

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