Extremely (un)likely: a plausibility approach to stress testing

CCP’s risk managers propose a framework for generating extreme but plausible stress scenarios

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Pierre Mouy, Quentin Archer and Mohamed Selmi present a framework for generating extreme but plausible stress scenarios. The framework provides a closed-form solution for elliptical distributions and an extension for adjusted marginals. The stress scenarios generated are equally likely, equally harmful and not affected by the addition of risk factors orthogonal to the portfolio

The question of financial market infrastructure stress testing, and central clearing

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