Scenario analysis
A framework to analyze the financial effects of climate change
Starting with an expert assessment of the climate risk factors over a specified horizon, then moving to a description of the expected number of climate events and the severity of the losses if an event occurs, the authors describe a framework to analyze…
A Libor market model including credit risk under the real-world measure
The authors present a methodology to generate future scenarios of interest rates for different credit ratings under a real-world probability measure. More precisely, they explain how to perform simulations of the real-world forward rates for different…
Aaron Brown: to learn how to handle a crisis, create one
Scenario analysis still isn’t taken seriously; it should be, says AQR’s former risk chief
US election scenarios: meltdown fears if poll contested
Crowd-sourced election scenarios show sharp falls and correlation breaks if Trump challenges results
Fed set to unveil operational resilience proposals
OpRisk North America: banks expected to design idiosyncratic stress scenarios to test resilience
Covid credit outlooks for UK banks vary
Standard Chartered and HSBC have worst downside outlooks relative to their own base cases
Banks aim to close op risk stress test capital gap
Standardising stress drivers could help smooth differences between bank loss estimates
Covid scenarios, pt II: apocalypse how?
Second crowd-sourced scenario exercise reveals polarised views in equities and FX
Podcast: CFM’s Bouchaud on agent-based models and ESG investing
Hedge fund quant, and Risk.net’s new columnist, shares his unique take on markets
Valuing scenarios with real option pricing
Risk managers could use Black-Scholes to help drive strategy, writes René Doff
What is essential is invisible to the eye: prioritizing near misses to prevent future disasters
Near misses represent a primary information source to analyze the operational risk exposure of a company, since they can reveal gaps in the control environment. The model proposed in this paper aims at identifying the most dangerous events that could…
Is trading indicator performance robust? Evidence from scenario building
This paper challenges widely applied trading indicators with regard to their ability to generate a robust performance.
Banks eye post-pandemic shake-up of op risk scenarios
Firms seek better handle on impact of global shocks, and hope to avert regulatory attention
Carbon pricing paths to a greener future, and potential roadblocks to public companies’ creditworthiness
In this paper, the authors introduce a valuation-based approach to estimate how energy transition risk may impact the creditworthiness of public companies globally within the next thirty years.
Don’t let a good crisis go to waste
As supervisory stress tests take a backseat, banks look for new ways to gauge extreme risks
Covid scenarios: finding the worst worst-case
As pandemic trashes historical data, a Risk.net tie-up with Ron Dembo’s new outfit tests promise of polling
Q&A: Ron Dembo on crowd-spotting black swans
Veteran quant argues large groups are better at gauging extreme uncertainty than small teams of experts
As Covid snaps credit models, lenders turn to stress-testing
Banks enlist scenario analysis to bolster creaking default models
Climate risk management – A self-assessment of progress
Due to a combination of increasing social pressure, demands for better disclosure from investors and emerging regulation, companies are increasingly questioning the extent to which they are incorporating climate change into their global risk management…
Quantifying systemic risk using Bayesian networks
Creditworthiness of individual entities may offer an insight into systemic risk of financial markets
ICAAP/ILAAP – Unlocking business value from capital and liquidity assessment
Regulators consider banks’ internal capital adequacy and assessment process (ICAAP) and internal liquidity adequacy assessment process (ILAAP) important tools in managing risk. The European Central Bank’s (ECB’s) updated guidance – which came into effect…
Quants bring ‘triptych’ of variables to risk measurement
Risk and portfolio managers at La Francaise and LFIS are squeezing more information out of stress tests