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Integrating Solvency And Liquidity Stress Tests The Use Of Markov Regime Switching Models
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Book Synopsis Integrating Solvency and Liquidity Stress Tests: The Use of Markov Regime-Switching Models by : Mr.Fei Han
Download or read book Integrating Solvency and Liquidity Stress Tests: The Use of Markov Regime-Switching Models written by Mr.Fei Han and published by International Monetary Fund. This book was released on 2019-11-15 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper presents a framework to integrate liquidity and solvency stress tests. An empirical study based on European bond trading data finds that asset sales haircuts depend on the total amount of assets sold and general liquidity conditions in the market. To account for variations in market liquidity, the study uses Markov regime-switching models and links haircuts with market volatility and the amount of securities sold by banks. The framework is accompanied by a Matlab program and an Excel-based tool, which allow the calculations to be replicated for any type of traded security and to be used for liquidity and solvency stress testing.
Book Synopsis INTEGRATING SOLVENCY AND LIQUIDITY STRESS TESTS by : Fei Han
Download or read book INTEGRATING SOLVENCY AND LIQUIDITY STRESS TESTS written by Fei Han and published by . This book was released on 2019 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Integrating Solvency and Liquidity Stress Tests: The Use of Markov Regime-Switching Models by : Mr.Fei Han
Download or read book Integrating Solvency and Liquidity Stress Tests: The Use of Markov Regime-Switching Models written by Mr.Fei Han and published by International Monetary Fund. This book was released on 2019-11-15 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper presents a framework to integrate liquidity and solvency stress tests. An empirical study based on European bond trading data finds that asset sales haircuts depend on the total amount of assets sold and general liquidity conditions in the market. To account for variations in market liquidity, the study uses Markov regime-switching models and links haircuts with market volatility and the amount of securities sold by banks. The framework is accompanied by a Matlab program and an Excel-based tool, which allow the calculations to be replicated for any type of traded security and to be used for liquidity and solvency stress testing.
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 Systemwide Liquidity Stress Testing Tool by : Ms. Hiroko Oura
Download or read book Systemwide Liquidity Stress Testing Tool written by Ms. Hiroko Oura and published by International Monetary Fund. This book was released on 2022-12-16 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Developing a systemic liquidity stress testing tool is challenging due to data constraints and hard-to-model behavioral factors. There has yet to be a uniformly accepted model partly because the nature of systemic liquidity risks differs significantly across countries. This paper offers a simple Excel-based tool to assess the high-level impact of aggregate liquidity stress on the whole economy and gauge its spillover across banks, non-bank financial institutions (NBFIs), and non-financial economic sectors. It primarily uses the balance sheet approach (BSA) data—a sector-aggregate matrix of financial exposure by counterpart—that have become increasingly available for various economies with all income levels. The results can identify systemically important financial linkages to be analyzed further and help calibrate macroprudential measures and a liquidity support framework. When liquidity stress stems from capital outflows, the tool can enrich policy discussion based on integrated policy framework (IPF) and international reserve adequacy perspectives.
Book Synopsis Handbook of Financial Stress Testing by : J. Doyne Farmer
Download or read book Handbook of Financial Stress Testing written by J. Doyne Farmer and published by Cambridge University Press. This book was released on 2022-04-14 with total page 730 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stress tests are the most innovative regulatory tool to prevent and fight financial crises. Their use has fundamentally changed the modeling of financial systems, financial risk management in the public and private sector, and the policies designed to prevent and mitigate financial crises. When financial crises hit, stress tests take center stage. Despite their centrality to public policy, the optimal design and use of stress tests remains highly contested. Written by an international team of leading thinkers from academia, the public sector, and the private sector, this handbook comprehensively surveys and evaluates the state of play and charts the innovations that will determine the path ahead. It is a comprehensive and interdisciplinary resource that bridges theory and practice and places financial stress testing in its wider context. This guide is essential reading for researchers, practitioners, and policymakers working on financial risk management and financial regulation.
Book Synopsis 2021 Financial Sector Assessment Program Review—Background Paper On Quantitative Analysis by : International Monetary
Download or read book 2021 Financial Sector Assessment Program Review—Background Paper On Quantitative Analysis written by International Monetary and published by International Monetary Fund. This book was released on 2021-05-28 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews quantitative tools of financial stability assessments under the Financial Sector Assessment Program (FSAP). A key focus of FSAPs is on methodologies to gauge risks on a system-wide level and propose mitigating measures. Therefore, the paper concentrates on the main elements of the FSAP’s macroprudential stress testing framework:(i) the interaction among solvency, liquidity, and contagion risks in the banking sector, (ii) the assessment of the health of nonbank financial institutions (NBFIs), their interactions with banks and their impact on financial markets, (iii) the assessment of the health of nonfinancial sectors and their links to the financial sector, and (iv) macroprudential policy analysis. The paper also reviews recent improvements in microprudential bank solvency stress testing—an important foundation for the macroprudential stress testing framework—and discusses new tools for emerging risks (climate change, fintech, and cyber).
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 Bank Solvency and Funding Cost by : Mr.Stefan W. Schmitz
Download or read book Bank Solvency and Funding Cost written by Mr.Stefan W. Schmitz and published by International Monetary Fund. This book was released on 2017-05-15 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents new evidence on the empirical relationship between bank solvency and funding costs. Building on a newly constructed dataset drawing on supervisory data for 54 large banks from six advanced countries over 2004–2013, we use a simultaneous equation approach to estimate the contemporaneous interaction between solvency and liquidity. Our results show that liquidity and solvency interactions can be more material than suggested by the existing empirical literature. A 100 bps increase in regulatory capital ratios is associated with a decrease of bank funding costs of about 105 bps. A 100 bps increase in funding costs reduces regulatory capital buffers by 32 bps. We also find evidence of non-linear effects between solvency and funding costs. Understanding the impact of solvency on funding costs is particularly relevant for stress testing. Our analysis suggests that neglecting the dynamic features of the solvency-liquidity nexus in the 2014 EU-wide stress test could have led to a significant underestimation of the impact of stress on bank capital ratios.
Book Synopsis Lasso Regressions and Forecasting Models in Applied Stress Testing by : Mr.Jorge A. Chan-Lau
Download or read book Lasso Regressions and Forecasting Models in Applied Stress Testing written by Mr.Jorge A. Chan-Lau and published by International Monetary Fund. This book was released on 2017-05-05 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Model selection and forecasting in stress tests can be facilitated using machine learning techniques. These techniques have proved robust in other fields for dealing with the curse of dimensionality, a situation often encountered in applied stress testing. Lasso regressions, in particular, are well suited for building forecasting models when the number of potential covariates is large, and the number of observations is small or roughly equal to the number of covariates. This paper presents a conceptual overview of lasso regressions, explains how they fit in applied stress tests, describes its advantages over other model selection methods, and illustrates their application by constructing forecasting models of sectoral probabilities of default in an advanced emerging market economy.
Author :International Monetary Fund. Monetary and Capital Markets Department Publisher :International Monetary Fund ISBN 13 :1484313437 Total Pages :109 pages Book Rating :4.4/5 (843 download)
Book Synopsis Japan by : International Monetary Fund. Monetary and Capital Markets Department
Download or read book Japan written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2017-07-31 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the stability of the financial system in Japan. Although the financial system has remained stable, the low profitability environment is creating new risks, and pressures are likely to persist. The search for yield among banks has led some to expand their overseas activities, and more generally to a growth in real estate lending and foreign securities investments. Efforts to increase risk-based lending to small-and medium-sized enterprises are welcome, but many banks still need to develop commensurate credit assessment capacities. Stress tests suggest that the banking sector remains broadly sound, although market risks are increasing, and there are some vulnerabilities among regional banks.
Author :International Monetary Fund. Monetary and Capital Markets Department Publisher :International Monetary Fund ISBN 13 :1475589581 Total Pages :160 pages Book Rating :4.4/5 (755 download)
Book Synopsis Global Financial Stability Report, April 2013 by : International Monetary Fund. Monetary and Capital Markets Department
Download or read book Global Financial Stability Report, April 2013 written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2013-04-17 with total page 160 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Global Financial Stability Report examines current risks facing the global financial system and policy actions that may mitigate these. It analyzes the key challenges facing financial and nonfinancial firms as they continue to repair their balance sheets. Chapter 2 takes a closer look at whether sovereign credit default swaps markets are good indicators of sovereign credit risk. Chapter 3 examines unconventional monetary policy in some depth, including the policies pursued by the Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank, and the U.S. Federal Reserve.
Book Synopsis Measuring Liquidity in Financial Markets by : Abdourahmane Sarr
Download or read book Measuring Liquidity in Financial Markets written by Abdourahmane Sarr and published by International Monetary Fund. This book was released on 2002-12 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an overview of indicators that can be used to illustrate and analyze liquidity developments in financial markets. The measures include bid-ask spreads, turnover ratios, and price impact measures. They gauge different aspects of market liquidity, namely tightness (costs), immediacy, depth, breadth, and resiliency. These measures are applied in selected foreign exchange, money, and capital markets to illustrate their operational usefulness. A number of measures must be considered because there is no single theoretically correct and universally accepted measure to determine a market's degree of liquidity and because market-specific factors and peculiarities must be considered.
Book Synopsis Balance Sheet Network Analysis of Too-Connected-to-Fail Risk in Global and Domestic Banking Systems by : Mr.Jorge A. Chan-Lau
Download or read book Balance Sheet Network Analysis of Too-Connected-to-Fail Risk in Global and Domestic Banking Systems written by Mr.Jorge A. Chan-Lau and published by International Monetary Fund. This book was released on 2010-04-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: The 2008/9 financial crisis highlighted the importance of evaluating vulnerabilities owing to interconnectedness, or Too-Connected-to-Fail risk, among financial institutions for country monitoring, financial surveillance, investment analysis and risk management purposes. This paper illustrates the use of balance sheet-based network analysis to evaluate interconnectedness risk, under extreme adverse scenarios, in banking systems in mature and emerging market countries, and between individual banks in Chile, an advanced emerging market economy.
Author :International Monetary Fund Staff Publisher :International Monetary Fund ISBN 13 :145197941X Total Pages :210 pages Book Rating :4.4/5 (519 download)
Book Synopsis Global Financial Stability Report by : International Monetary Fund Staff
Download or read book Global Financial Stability Report written by International Monetary Fund Staff and published by International Monetary Fund. This book was released on 2008-04-08 with total page 210 pages. Available in PDF, EPUB and Kindle. Book excerpt: The events of the past six months have demonstrated the fragility of the global financial system and raised fundamental questions about the effectiveness of the response by private and public sector institutions. the report assesses the vulnerabilities that the system is facing and offers tentative conclusions and policy lessons. the report reflects information available up to March 21, 2008.
Book Synopsis Stock Market Liquidity in Chile by : Mr.Luis Brandao-Marques
Download or read book Stock Market Liquidity in Chile written by Mr.Luis Brandao-Marques and published by International Monetary Fund. This book was released on 2016-11-16 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chile has a large but relatively illiquid stock market. Global factors such as global risk appetite and monetary policy in advanced economies are key cyclical determinants of liquidity in Chilean equities. Evidence from a cross-section of emerging markets suggests strong protection of minority shareholders can help improve stock market liquitidity. Currently, illiquid in Chilean may have to pay 31⁄2 percent more as cost of equity. Corporate governance should be improved, namely through the adoption of a stewardship code.
Author :International Monetary Fund. Monetary and Capital Markets Department Publisher :International Monetary Fund ISBN 13 :1484369440 Total Pages :145 pages Book Rating :4.4/5 (843 download)
Book Synopsis Euro Area Policies by : International Monetary Fund. Monetary and Capital Markets Department
Download or read book Euro Area Policies written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2018-07-19 with total page 145 pages. Available in PDF, EPUB and Kindle. Book excerpt: The FSAP team undertook a thorough top-down stress testing analysis using end-2017 data. This note covers the methodology and results of the scenario-based solvency tests, the single factor sensitivity tests, and the liquidity tests. The stress test exercise was carried out on a sample of major euro area banks supervised by the Single Supervisory Mechanism (SSM). The analysis is heavily dependent on comprehensive and granular supervisory data on individual banks’ positions shared by the European Central Bank (ECB). While FSAP results are not directly comparable to the 2018 EU-wide stress test results due to differences in scenarios, methodologies, and objectives, they provide an assessment of the system-wide resilience of the euro area banking sector at the current juncture.
