Stress Testing for Risk Control Under Basel II Book
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Stress Testing for Risk Control Under Basel II


  • Author : Dimitris N. Chorafas
  • Publisher : Elsevier
  • Release Date : 2011-04-08
  • Genre: Business & Economics
  • Pages : 360
  • ISBN 10 : 0080467059

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Stress Testing for Risk Control Under Basel II Excerpt :

The Consultative paper issued by the Basel Committee on Banking Supervision (Basel II) cites the failure of bankers to adequately stress test exposures as a major reason for bad loans. Sample quotes from this crucial document: * "Banks should take into consideration potential future changes in economic conditions when assessing individual credits and their credit portfolios, and should assess their credit risk exposures under stressful conditions." * "The recent disturbances in Asia and Russia illustrate how close linkages among emerging markets under stress conditions and previously undetected correlations between market and credit risks, as well as between those risks and liquidity risk, can produce widespread losses." * "Effective stress testing which takes account of business or product cycle effects is one approach to incorporating into credit decisions a fuller understanding of a borrower's credit risk." Written for professionals in financial services with responsibility for IT and risk measurement, management, and modeling, Dimitris Chorafas explains in clear language the testing methodology necessary for risk control to meet Basel II requirements. Stress testing is the core focus of the book, covering stress analysis and the use of scenarios, models, drills, benchmarking, backtesting, and post-mortems, creditworthiness, wrong way risk and statistical inference, probability of default, loss given default and exposure at default, stress testing expected losses, correlation coefficients, and unexpected losses, stress testing related to market discipline and control action, and pillars 2 and 3 of Basel II. * Written in clear, straightforward style with numerous practical examples * Based on five years of development and research * Focuses on stress probability of default, stress loss given default, stsress exposure at default

The Basel II Risk Parameters Book

The Basel II Risk Parameters


  • Author : Bernd Engelmann
  • Publisher : Springer Science & Business Media
  • Release Date : 2011-03-31
  • Genre: Business & Economics
  • Pages : 426
  • ISBN 10 : 9783642161148

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The Basel II Risk Parameters Excerpt :

The estimation and the validation of the Basel II risk parameters PD (default probability), LGD (loss given fault), and EAD (exposure at default) is an important problem in banking practice. These parameters are used on the one hand as inputs to credit portfolio models and in loan pricing frameworks, on the other to compute regulatory capital according to the new Basel rules. This book covers the state-of-the-art in designing and validating rating systems and default probability estimations. Furthermore, it presents techniques to estimate LGD and EAD and includes a chapter on stress testing of the Basel II risk parameters. The second edition is extended by three chapters explaining how the Basel II risk parameters can be used for building a framework for risk-adjusted pricing and risk management of loans.

Stress Testing at the IMF Book

Stress Testing at the IMF


  • Author : Mr.Tobias Adrian
  • Publisher : International Monetary Fund
  • Release Date : 2020-02-05
  • Genre: Business & Economics
  • Pages : 72
  • ISBN 10 : 9781513520742

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Stress Testing at the IMF 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.

The Basel II Risk Parameters Book

The Basel II Risk Parameters


  • Author : Bernd Engelmann
  • Publisher : Springer Science & Business Media
  • Release Date : 2006-08-25
  • Genre: Business & Economics
  • Pages : 376
  • ISBN 10 : 9783540330875

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The Basel II Risk Parameters Excerpt :

A critical problem in the practice of banking risk assessment is the estimation and validation of the Basel II risk parameters PD (default probability), LGD (loss given default), and EAD (exposure at default). This book presents the state-of-the-art in designing and validating rating systems and default probability estimations, and outlines techniques to estimate LGD and EAD. Also included is a chapter on stress testing of the Basel II risk parameters.

Risk Management Technology in Financial Services Book

Risk Management Technology in Financial Services


  • Author : Dimitris N. Chorafas
  • Publisher : Elsevier
  • Release Date : 2011-04-08
  • Genre: Business & Economics
  • Pages : 352
  • ISBN 10 : 0080498094

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Risk Management Technology in Financial Services Excerpt :

Written for professionals in financial services with responsibility for IT and risk management, Dimitris Chorafas surveys the methodology required and IT systems and structures to support it according to Basel II. The book is consistent with the risk management certification process of GARP, as well as the accounting rules of IFRS, based on research the author conducted with IASB. The author provices an in-depth discussion of the types of risk, stress analysis and the use of scenarios, mathematical models, and IT systems and infrastructure requirements. * Written in clear, straightforward style for financial industry executives to provide necessary information for risk control decisionmaking * Consistent with GARP, IFRS and IASB risk management processes and procedures * Explains stress testing and its place in risk control

Credibility and Crisis Stress Testing Book

Credibility and Crisis Stress Testing


  • Author : Ms. Li L. Ong
  • Publisher : International Monetary Fund
  • Release Date : 2013-08-09
  • Genre: Business & Economics
  • Pages : 63
  • ISBN 10 : 9781475527063

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Credibility and Crisis Stress Testing 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.

Stress Testing and Risk Integration in Banks Book

Stress Testing and Risk Integration in Banks


  • Author : Tiziano Bellini
  • Publisher : Academic Press
  • Release Date : 2016-11-26
  • Genre: Business & Economics
  • Pages : 316
  • ISBN 10 : 9780128036112

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Stress Testing and Risk Integration in Banks Excerpt :

Stress Testing and Risk Integration in Banks provides a comprehensive view of the risk management activity by means of the stress testing process. An introduction to multivariate time series modeling paves the way to scenario analysis in order to assess a bank resilience against adverse macroeconomic conditions. Assets and liabilities are jointly studied to highlight the key issues that a risk manager needs to face. A multi-national bank prototype is used all over the book for diving into market, credit, and operational stress testing. Interest rate, liquidity and other major risks are also studied together with the former to outline how to implement a fully integrated risk management toolkit. Examples, business cases, and exercises worked in Matlab and R facilitate readers to develop their own models and methodologies. Provides a rigorous statistical framework for modeling stress test in line with U.S. Federal Reserve FRB CCAR (Comprehensive Capital Analysis Review), U.K. PRA (Prudential Regulatory Authority), EBA (European Baning Authorithy) and comply with Basel Accord requirements Follows an integrated bottom-up approach central in the most advanced risk modelling practice Provides numerous sample codes in Matlab and R

Reverse Stress Testing in Banking Book

Reverse Stress Testing in Banking


  • Author : Michael Eichhorn
  • Publisher : Walter de Gruyter GmbH & Co KG
  • Release Date : 2021-05-10
  • Genre: Business & Economics
  • Pages : 583
  • ISBN 10 : 9783110647907

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Reverse Stress Testing in Banking 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.

Financial Risk Management Book
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Financial Risk Management


  • Author : Jimmy Skoglund
  • Publisher : John Wiley & Sons
  • Release Date : 2015-10-12
  • Genre: Business & Economics
  • Pages : 576
  • ISBN 10 : 9781119135517

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Financial Risk Management Excerpt :

Presenting an in-depth look at banking risk on a global scale, including comprehensive examination of the U.S. Comprehensive Capital Analysis and Review, and the European Banking Authority stress tests, this guide offers the most up-to-date information and expert insight into real risk management, based on the authors' experience in developing and implementing risk analytics in banks around the globe. --

Emerging Trends in Smart Banking  Risk Management Under Basel II and III Book

Emerging Trends in Smart Banking Risk Management Under Basel II and III


  • Author : Li, Siqiwen
  • Publisher : IGI Global
  • Release Date : 2014-04-30
  • Genre: Business & Economics
  • Pages : 290
  • ISBN 10 : 9781466659513

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Emerging Trends in Smart Banking Risk Management Under Basel II and III Excerpt :

The 2008 global financial crisis has illustrated the need for tighter regulations and management of banking institutions, approaching banking and money lending in a more intelligent, directed fashion. Emerging Trends in Smart Banking: Risk Management Under Basel II and III discusses some of the latest developments in banking regulations and safeguards to ensure the mitigation of risk and economic collapse. This book is a critical reference in the exploration of business frameworks to identify areas of strength and potential weaknesses, insight that will be of use to business leaders, professionals in the banking industry, and researchers and scholars in all aspects of business and accounting.

Liquidity at Risk  Joint Stress Testing of Solvency and Liquidity Book

Liquidity at Risk Joint Stress Testing of Solvency and Liquidity


  • Author : Rama Cont
  • Publisher : International Monetary Fund
  • Release Date : 2020-06-05
  • Genre: Business & Economics
  • Pages : 39
  • ISBN 10 : 9781513546131

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Liquidity at Risk Joint Stress Testing of Solvency and Liquidity Excerpt :

The traditional approach to the stress testing of financial institutions focuses on capital adequacy and solvency. Liquidity stress tests have been applied in parallel to and independently from solvency stress tests, based on scenarios which may not be consistent with those used in solvency stress tests. We propose a structural framework for the joint stress testing of solvency and liquidity: our approach exploits the mechanisms underlying the solvency-liquidity nexus to derive relations between solvency shocks and liquidity shocks. These relations are then used to model liquidity and solvency risk in a coherent framework, involving external shocks to solvency and endogenous liquidity shocks arising from these solvency shocks. We define the concept of ‘Liquidity at Risk’, which quantifies the liquidity resources required for a financial institution facing a stress scenario. Finally, we show that the interaction of liquidity and solvency may lead to the amplification of equity losses due to funding costs which arise from liquidity needs. The approach described in this study provides in particular a clear methodology for quantifying the impact of economic shocks resulting from the ongoing COVID-19 crisis on the solvency and liquidity of financial institutions and may serve as a useful tool for calibrating policy responses.

Stress testing the Banking System Book

Stress testing the Banking System


  • Author : Mario Quagliariello
  • Publisher : Cambridge University Press
  • Release Date : 2009-10-15
  • Genre: Business & Economics
  • Pages : null
  • ISBN 10 : 9781139482837

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Stress testing the Banking System 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.

Credit Risk Analytics Book

Credit Risk Analytics


  • Author : Bart Baesens
  • Publisher : John Wiley & Sons
  • Release Date : 2016-10-03
  • Genre: Business & Economics
  • Pages : 512
  • ISBN 10 : 9781119143987

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Credit Risk Analytics 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