Technical paper/Stress-testing
Central counterparty CVA
Matthias Arnsdorf proposes a method to calculate the counterparty risk related to CCP membership
Quantification of model risk in stress testing and scenario analysis
In this paper, the author's aim is to empirically analyze the numerical quantification of model risk, yielding exact buffers in currency amounts (for a given model uncertainty).
Systemic risk in the financial system: capital shortfalls under Brexit, the US elections and the Italian referendum
This paper uses SRISK to quantify the estimated capital shortfalls of financial institutions under three relevant stress events that occurred in 2016: Brexit, the Trump election and the Italian referendum.
A new model for bank loan loss given default by leveraging time to recovery
In this paper, the author estimates a two-equation system: one for LGD that incorporates time to recovery as one of the model explanatory variables, and the other for time to recovery using survival models that address data censoring.
Measuring system-wide resilience of central counterparties
This paper describes the three components needed to simultaneously stress clearing members and CCPs across markets: scenario generation, evaluation of the profit and loss (P&L) of clearing member portfolios for each scenario, and default of clearing…
A risk-sensitive approach for stressed transition probability matrixes
In this paper, the authors outline a simulation-based methodology for the generation of stressed transition probability matrixes under the structural credit risk framework.
Forward ordinal probability models for point-in-time probability of default term structure: methodologies and implementations for IFRS 9 expected credit loss estimation and CCAR stress testing
This paper proposes an ordinal model based on forward ordinal probabilities for rank outcomes.
Extremely (un)likely: a plausibility approach to stress testing
CCP’s risk managers propose a framework for generating extreme but plausible stress scenarios
Stress hedging in portfolio construction
Bilgili, Ferconi and Ulitsky propose a constrained portfolio optimisation approach incorporating stress scenarios
Forecasting scenarios from the perspective of a reverse stress test using second-order cone programming
This paper proposes a model for forecasting scenarios from the perspective of a reverse stress test using interest rate, equity and foreign exchange data.
A network model for central counterparty liquidity risk stress testing under incomplete information
The authors put forth a realistic network model that maximizes the use of data available to a CCP in order to simulate credit default contagion.
Rating momentum in the macroeconomic stress testing and scenario analysis of credit risk
This paper focuses on the corporate stress testing models for credit risk.
A model combination approach to developing robust models for credit risk stress testing: an application to a stressed economy
This paper uses a model combination approach to develop robust macrofinancial models for credit risk stress testing.
Point-in-time probability of default term structure models for multiperiod scenario loss projection
The author of this paper proposes a dynamic PD term structure model for multi-period stress testing and expected credit loss estimation.
Benchmarking the loss given default parameter for mortgage loan portfolios under stress
The authors analyze the impact of a decline in property prices that leads to stressed recovery rates for collateral on the loss given default (LGD) parameter in portfolios of mortgage loan.
Rating-transition-probability models and Comprehensive Capital Analysis and Review stress testing: methodologies and implementation
This paper introduces a risk component called the credit index, that represents the systematic risk part of a portfolio by a list of macroeconomic variables.
The application of credit risk models to macroeconomic scenario analysis and stress testing
The authors demonstrate how different credit risk models can be efficiently implemented for scenario analysis and stress testing execution with concrete application examples.
Bank fraud and the macroeconomy
This paper empirically tests for correlations between fraud and the macroeconomy.
A framework for market, credit and transfer risk aggregation and stress testing
The authors develop a framework that consistently and fully integrates the market, credit and country transfer risks of a general portfolio of financial assets in a multi-period setup.
Banks’ expected equity-to-asset ratio bounds under foreign exchange risk
This paper develops optimal bounds of the expectation equity-to-asset ratio.
Liquidity stress testing: a model for a portfolio of credit lines
This paper demonstrates how cash outflows due to credit lines can be modeled in a liquidity stress test.
Stress testing and model validation: application of the Bayesian approach to a credit risk portfolio
The authors of this paper develop a Bayesian-based credit risk stress-testing methodology.