Technical paper/Scenario analysis
Scenario design for macrofinancial stress testing
The author presents an empirical approach to scenario design for selecting a stress scenario for international macrofinancial variables and compares this approach with a historical scenario approach.
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.
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.
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.
Quantifying systemic risk using Bayesian networks
Creditworthiness of individual entities may offer an insight into systemic risk of financial markets
Applying existing scenario techniques to the quantification of emerging operational risks
This paper sets out techniques for: (a) identifying systematically emerging threats, their timescales, and interrelationships (eg, feedback loops and domino effects); (b) quantifying operational risks through structured scenario analysis processes that…
An investigation of cyber loss data and its links to operational risk
This paper investigates cyber loss data and focuses on quantifying the direct financial and compensatory losses emanating from cyber risks.
International Financial Reporting Standard 9 expected credit loss estimation: advanced models for estimating portfolio loss and weighting scenario losses
In this paper, the authors propose a model to estimate the expected portfolio losses brought about by recession risk and a quantitative approach to determine the scenario weights.
Application of the convolution operator for scenario integration with loss data in operational risk modeling
This paper addresses the uncertainty in scenario analysis and produces a combined loss distribution.
Risk evaluation of wind turbine investments
This paper assesses the risk inherent in wind turbine investments that rely on a power market in order to determine the selling price of generated power.
Backward induction for future values
A new framework for derivatives pricing with valuation adjustments
Stressed in Monte Carlo
Stressed in Monte Carlo
Fully flexible views: theory and practice
Attilio Meucci proposes a unified methodology to input non-linear views from any number of users in fully general non-normal markets and perform, among others, stress testing, scenario analysis and ranking allocation. He walks the reader through the…
A practical operational risk scenario analysis quantification
Thomas Alderweireld, João Garcia and Luc Léonard define an operational risk scenario analysis and its quantification technique, leading to the determination of the loss distribution characteristics. The method is based on simple questions put to…
Beyond the lognormal
Value-at-risk