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Forecasting Banks Corporate Loan Losses Under Stress
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Book Synopsis Forecasting Banks' Corporate Loan Losses Under Stress by : Gabriel Bruneau
Download or read book Forecasting Banks' Corporate Loan Losses Under Stress written by Gabriel Bruneau and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: "We develop a corporate default model to forecast corporate loan losses of the Canadian banking sector under stress. First, we tackle a data gap by reconstructing historical default probabilities for banks' loan portfolios. Second, we estimate tail elasticities to capture nonlinear relationships between macrofinancial conditions and default probabilities. By explicitly modelling default probabilities associated with macroeconomic tail events, this model significantly improves the Bank of Canada's stress-testing infrastructure"--Abstract.
Book Synopsis Expected Credit Loss Modeling from a Top-Down Stress Testing Perspective by : Mr.Marco Gross
Download or read book Expected Credit Loss Modeling from a Top-Down Stress Testing Perspective written by Mr.Marco Gross and published by International Monetary Fund. This book was released on 2020-07-03 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this paper is to present an integrated tool suite for IFRS 9- and CECL-compatible estimation in top-down solvency stress tests. The tool suite serves as an illustration for institutions wishing to include accounting-based approaches for credit risk modeling in top-down stress tests.
Book Synopsis Credibility and Crisis Stress Testing by : Ms.Li L. Ong
Download or read book Credibility and Crisis Stress Testing written by Ms.Li L. Ong and published by International Monetary Fund. This book was released on 2013-08-09 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credibility is the bedrock of any crisis stress test. The use of stress tests to manage systemic risk was introduced by the U.S. authorities in 2009 in the form of the Supervisory Capital Assessment Program. Since then, supervisory authorities in other jurisdictions have also conducted similar exercises. In some of those cases, the design and implementation of certainelements of the framework have been criticized for their lack of credibility. This paper proposes a set of guidelines for constructing an effective crisis stress test. It combines financial markets impact studies of previous exercises with relevant case study information gleaned from those experiences to identify the key elements and to formulate their appropriate design. Pertinent concepts, issues and nuances particular to crisis stress testing are also discussed. The findings may be useful for country authorities seeking to include stress tests in their crisis management arsenal, as well as for the design of crisis programs.
Book Synopsis Stress Testing at the IMF by : Mr.Tobias Adrian
Download or read book Stress Testing at the IMF written by Mr.Tobias Adrian and published by International Monetary Fund. This book was released on 2020-02-05 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explains specifics of stress testing at the IMF. After a brief section on the evolution of stress tests at the IMF, the paper presents the key steps of an IMF staff stress test. They are followed by a discussion on how IMF staff uses stress tests results for policy advice. The paper concludes by identifying remaining challenges to make stress tests more useful for the monitoring of financial stability and an overview of IMF staff work program in that direction. Stress tests help assess the resilience of financial systems in IMF member countries and underpin policy advice to preserve or restore financial stability. This assessment and advice are mainly provided through the Financial Sector Assessment Program (FSAP). IMF staff also provide technical assistance in stress testing to many its member countries. An IMF macroprudential stress test is a methodology to assess financial vulnerabilities that can trigger systemic risk and the need of systemwide mitigating measures. The definition of systemic risk as used by the IMF is relevant to understanding the role of its stress tests as tools for financial surveillance and the IMF’s current work program. IMF stress tests primarily apply to depository intermediaries, and, systemically important banks.
Book Synopsis Stress Testing Financial Systems by : Mr.Matthew T Jones
Download or read book Stress Testing Financial Systems written by Mr.Matthew T Jones and published by International Monetary Fund. This book was released on 2004-09-27 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stress testing is becoming a widely used tool to assess potential vulnerabilities in a financial system. This booklet is intended to answer some of the basic questions that may arise as part of the process of stress testing. The pamphlet begins with a discussion of stress testing in a financial system context, highlighting some of the differences between stress tests of systems and of individual portfolios. The booklet provides an overview of the process itself, from identifying vulnerabilities, to constructing scenarios, to interpreting the results. The experience of the IMF in conducting stress testing as part of the Financial Sector Assessment Program (FSAP) is also discussed.
Book Synopsis International Convergence of Capital Measurement and Capital Standards by :
Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Stress-testing the Banking System by : Mario Quagliariello
Download or read book Stress-testing the Banking System written by Mario Quagliariello and published by Cambridge University Press. This book was released on 2009-10-15 with total page 355 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stress tests are used in risk management by banks in order to determine how certain crisis scenarios would affect the value of their portfolios, and by public authorities for financial stability purposes. Until the first half of 2007, interest in stress-testing was largely restricted to practitioners. Since then, the global financial system has been hit by deep turbulences, including the fallout from sub-prime mortgage lending. Many observers have pointed out that the severity of the crisis has been largely due to its unexpected nature and have claimed that a more extensive use of stress-testing methodologies would have helped to alleviate the repercussions of the crisis. This book analyses the theoretical underpinnings, as well as the practical aspects, of applying such methodologies. Building on the experience gained by the economists of many national and international financial authorities, it provides an updated toolkit for both practitioners and academics.
Book Synopsis Rules of Thumb for Bank Solvency Stress Testing by : Mr.Daniel C. Hardy
Download or read book Rules of Thumb for Bank Solvency Stress Testing written by Mr.Daniel C. Hardy and published by International Monetary Fund. This book was released on 2013-11-11 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: Rules of thumb can be useful in undertaking quick, robust, and readily interpretable bank stress tests. Such rules of thumb are proposed for the behavior of banks’ capital ratios and key drivers thereof—primarily credit losses, income, credit growth, and risk weights—in advanced and emerging economies, under more or less severe stress conditions. The proposed rules imply disproportionate responses to large shocks, and can be used to quantify the cyclical behaviour of capital ratios under various regulatory approaches.
Download or read book FDIC Quarterly written by and published by . This book was released on 2009 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Stress Testing and Calibration of Macroprudential Policy Tools by : Lucyna Gornicka
Download or read book Stress Testing and Calibration of Macroprudential Policy Tools written by Lucyna Gornicka and published by . This book was released on 2020-08-14 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present a semi-structural model of default risk, which is a function of loan and borrower characteristics, economic conditions, and the regulatory environment. We use this model to simulate bank credit losses for stress-testing purposes and to calibrate borrower-based macroprudential tools. The proposed approach is very flexible and is particularly useful when there is limited history of crisis episodes, when crises bring unanticipated shocks where past tail events offer little guidance and when structural shocks or changes in financial regulations have altered the loan default process. We apply the model to quantify mortgage lending risk in two distinct mortgage markets. For each application, we show a range of modeling adjustments that can be made to capture country-specific institutional features. The model uses bank portfolio data broken down by risk bucket and vintage, which enables us to take explicit account of the loan life cycle and to incorporate the housing and economic cycles. This feature facilitates a timely assessment of banks' loss-absorbing capacity and the buildup of systemic risk conditional on policy. It also enables counterfactual analysis and the evaluation of macroprudential policy interventions.
Book Synopsis Powering the Digital Economy: Opportunities and Risks of Artificial Intelligence in Finance by : El Bachir Boukherouaa
Download or read book Powering the Digital Economy: Opportunities and Risks of Artificial Intelligence in Finance written by El Bachir Boukherouaa and published by International Monetary Fund. This book was released on 2021-10-22 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the impact of the rapid adoption of artificial intelligence (AI) and machine learning (ML) in the financial sector. It highlights the benefits these technologies bring in terms of financial deepening and efficiency, while raising concerns about its potential in widening the digital divide between advanced and developing economies. The paper advances the discussion on the impact of this technology by distilling and categorizing the unique risks that it could pose to the integrity and stability of the financial system, policy challenges, and potential regulatory approaches. The evolving nature of this technology and its application in finance means that the full extent of its strengths and weaknesses is yet to be fully understood. Given the risk of unexpected pitfalls, countries will need to strengthen prudential oversight.
Book Synopsis Next Generation Balance Sheet Stress Testing by : Mr. Christian Schmieder
Download or read book Next Generation Balance Sheet Stress Testing written by Mr. Christian Schmieder and published by International Monetary Fund. This book was released on 2011-04-01 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a "second-generation" solvency stress testing framework extending applied stress testing work centered on Cihák (2007). The framework seeks enriching stress tests in terms of risk-sensitivity, while keeping them flexible, transparent, and user-friendly. The main contributions include (a) increasing the risk-sensitivity of stress testing by capturing changes in risk-weighted assets (RWAs) under stress, including for non-internal ratings based (IRB) banks (through a quasi-IRB approach); (b) providing stress testers with a comprehensive platform to use satellite models, and to define various assumptions and scenarios; (c) allowing stress testers to run multi-year scenarios (up to five years) for hundreds of banks, depending on the availability of data. The framework uses balance sheet data and is Excel-based with detailed guidance and documentation.
Book Synopsis Reverse Stress Testing in Banking by : Michael Eichhorn
Download or read book Reverse Stress Testing in Banking written by Michael Eichhorn and published by Walter de Gruyter GmbH & Co KG. This book was released on 2021-05-10 with total page 583 pages. Available in PDF, EPUB and Kindle. Book excerpt: Reverse stress testing was introduced in risk management as a regulatory tool for financial institutions more than a decade ago. The recent Covid-19 crisis illustrates its relevance and highlights the need for a systematic re-thinking of tail risks in the banking sector. This book addresses the need for practical guidance describing the entire reverse stress testing process. Reverse Stress Testing in Banking features contributions from a diverse range of established practitioners and academics. Organized in six parts, the book presents a series of contributions providing an in-depth understanding of: Regulatory requirements and ways to address them Quantitative and qualitative approaches to apply reverse stress testing at different levels – from investment portfolios and individual banks to the entire banking system The use of artificial intelligence, machine learning and quantum computing to gain insights into and address banks’ structural weaknesses Opportunities to co-integrate reverse stress testing with recovery and resolution planning Governance and processes for board members and C-suite executives Readers will benefit from the case studies, use cases from practitioners, discussion questions, recommendations and innovative practices provided in this insightful and pioneering book.
Book Synopsis Credit Risk Analytics by : Bart Baesens
Download or read book Credit Risk Analytics written by Bart Baesens and published by John Wiley & Sons. This book was released on 2016-10-03 with total page 517 pages. Available in PDF, EPUB and Kindle. Book excerpt: The long-awaited, comprehensive guide to practical credit risk modeling Credit Risk Analytics provides a targeted training guide for risk managers looking to efficiently build or validate in-house models for credit risk management. Combining theory with practice, this book walks you through the fundamentals of credit risk management and shows you how to implement these concepts using the SAS credit risk management program, with helpful code provided. Coverage includes data analysis and preprocessing, credit scoring; PD and LGD estimation and forecasting, low default portfolios, correlation modeling and estimation, validation, implementation of prudential regulation, stress testing of existing modeling concepts, and more, to provide a one-stop tutorial and reference for credit risk analytics. The companion website offers examples of both real and simulated credit portfolio data to help you more easily implement the concepts discussed, and the expert author team provides practical insight on this real-world intersection of finance, statistics, and analytics. SAS is the preferred software for credit risk modeling due to its functionality and ability to process large amounts of data. This book shows you how to exploit the capabilities of this high-powered package to create clean, accurate credit risk management models. Understand the general concepts of credit risk management Validate and stress-test existing models Access working examples based on both real and simulated data Learn useful code for implementing and validating models in SAS Despite the high demand for in-house models, there is little comprehensive training available; practitioners are left to comb through piece-meal resources, executive training courses, and consultancies to cobble together the information they need. This book ends the search by providing a comprehensive, focused resource backed by expert guidance. Credit Risk Analytics is the reference every risk manager needs to streamline the modeling process.
Book Synopsis Macroprudential Solvency Stress Testing of the Insurance Sector by : Mr.Andreas A. Jobst
Download or read book Macroprudential Solvency Stress Testing of the Insurance Sector written by Mr.Andreas A. Jobst and published by International Monetary Fund. This book was released on 2014-07-22 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the last decade, stress testing has become a central aspect of the Fund’s bilateral and multilateral surveillance work. Recently, more emphasis has also been placed on the role of insurance for financial stability analysis. This paper reviews the current state of system-wide solvency stress tests for insurance based on a comparative review of national practices and the experiences from Fund’s FSAP program with the aim of providing practical guidelines for the coherent and consistent implementation of such exercises. The paper also offers recommendations on improving the current insurance stress testing approaches and presentation of results.
Book Synopsis Handbook of Econometrics by : Z. Griliches
Download or read book Handbook of Econometrics written by Z. Griliches and published by North Holland. This book was released on 1983-11 with total page 722 pages. Available in PDF, EPUB and Kindle. Book excerpt: V.l: Mathematical and statistical methods in econometrics; Econometric models; Estimation and computation; v.2: Testing; Time series topics; Special topics in econometrics; v.3: Special topics in econometrics; Selected applications and uses of econometrics.
Book Synopsis Asset Correlations and Credit Portfolio Risk by : Klaus Duellmann
Download or read book Asset Correlations and Credit Portfolio Risk written by Klaus Duellmann and published by . This book was released on 2016 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: In credit risk modelling, the correlation of unobservable asset returns is a crucial component for the measurement of portfolio risk. In this paper, we estimate asset correlations from monthly time series of Moody's KMV asset values for around 2,000 European firms from 1996 to 2004. We compare correlation and value-atrisk (VaR) estimates in a one-factor or market model and a multi-factor or sector model. Our main finding is a complex interaction of credit risk correlations and default probabilities affecting total credit portfolio risk. Differentiation between industry sectors when using the sector model instead of the market model has only a secondary effect on credit portfolio risk, at least for the underlying credit portfolio. Averaging firm-dependent asset correlations on a sector level can, however, cause a substantial underestimation of the VaR in a portfolio with heterogeneous borrower size. This result holds for the market as well as the sector model. Furthermore, the VaR of the IRB model is more stable over time than the VaR of the market model and the sector model, while its distance from the other two models fluctuates over time.
