Stress Testing
First published:
ISBN: 9781782720089
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Stress Testing and Other Risk-Management Tools
Introduction to Stress Testing: Approaches, Methods and Applications
Governance over Stress Testing
Stress Testing and Other Risk-Management Tools
Stress Testing for Market Risk
The Evolution of Stress Testing Counterparty Exposures
Operational Risk: An Overview of Stress-Testing Methodologies
Stress Testing of Bank Loan Portfolios as a Diagnostic Tool
Stress-Test Modelling for Loan Losses and Reserves
A Framework for Stress Testing Banks’ Corporate Credit Portfolio
EU-Wide Stress Test: The Experience of the EBA
Stress Testing Across International Exposures and Activities
Liquidity Risk: The Case of the Brazilian Banking System
Determining the Severity of Macroeconomic Stress Scenarios
The later chapters in this book are focused on various elements and aspects of stress testing. Stress tests have gained in prominence since the financial crisis of 2007-9. However, stress testing existed in the arsenal of risk managers well before the financial crisis. But it has not existed in isolation: along with stress tests, risk managers have always used other tools.
In our experience, quite sophisticated stress testing existed in many banks management of market risk before the 20079 crisis, and it often focused on the trading book. This included both transaction and portfolio-level stress testing. In contrast, stress testing of credit risk was more likely to be at a transaction level. Portfolio-level stress testing was often rudimentary, if it existed all. Enterprise-wide stress tests tended to be rudimentary (with one or two notable exceptions), as well, especially for institutions that had large banking books.
Risk management in financial institutions has always relied on a panoply of tools and measures. Textbooks on risk management at financial institutions describe various other tools such as position limits and exposure limits, as well as limits on the Greeks, such
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