Introduction to applied stress testing /

Introduction to applied stress testing /

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Bibliographic Details
Author / Creator:Čihák, Martin, author.
Imprint:Washington, D.C. : International Monetary Fund, ©2007.
Description:1 online resource (74 pages) : illustrations
Language:English
Series:IMF working paper ; WP/07/59.
Subject:
Financial institutions -- Evaluation -- Econometric models.
Risk assessment -- Econometric models.
Risk -- Econometric models.
Interest rate risk.
Interest rate risk.
Risk assessment -- Econometric models.
Risk -- Econometric models.
Format: E-Resource Book
URL for this record:http://pi.lib.uchicago.edu/1001/cat/bib/12496184
Hidden Bibliographic Details
Other authors / contributors:International Monetary Fund. Monetary and Capital Markets Department.
ISBN:128244834X
9781282448346
1451910762
9781451910766
1462345743
9781462345748
9786613821539
6613821535
Notes:Includes bibliographical references (pages 71-74).
Restrictions unspecified
Electronic reproduction. [Place of publication not identified] : HathiTrust Digital Library, 2010.
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212
English.
digitized 2010 HathiTrust Digital Library committed to preserve
Print version record.
Summary:Stress testing is a useful and increasingly popular, yet sometimes misunderstood, method of analyzing the resilience of financial systems to adverse events. This paper aims to help demystify stress tests, and illustrate their strengths and weaknesses. Using an Excel-based exercise with institution-by-institution data, readers are walked through stress testing for credit risk, interest rate and exchange rate risks, liquidity risk and contagion risk, and are guided in the design of stress testing scenarios. The paper also describes the links between stress testing and other analytical tools, such as financial soundness indicators and supervisory early warning systems. Furthermore, it includes surveys of stress testing practices in central banks and the IMF.
Other form:Print version: Čihák, Martin. Introduction to applied stress testing. Washington, D.C. : International Monetary Fund, ©2007
Standard no.:10.5089/9781451910766.001
Table of Contents:
  • I. Introduction; II. Overview of the File and of the Stress Testing Process; A. How To Operate Stress Tester 2.0-A Quick Guide to the Accompanying File; Boxes; 1. Background Information on Bankistan's Economy and Banking Sector; Figures; 1. Stress Testing Framework; Table; 1. Stress Tester 2.0: Description of the Worksheets; B. Top Down or Bottom Up?; C. Presenting Stress Test Results-What Variables Can Be Stressed?; D. How Are the Results Presented in Stress Tester 2.0?; III. Understanding And Analyzing the Input Data; A. Coverage of Stress Tests.
  • 2. Stress Tests for Insurance CompaniesB. Balance Sheets, Income Statements, and Other Input Data; C. Indicators of Financial Sector Soundness and Structure; 3. How To Do Stress Tests When NPLs or Other Input Data Are Unavailable; D. Ratings and Probabilities of Default; 2. 'Step Function' (Example); IV. Credit Risk; 3. Back-Testing a Supervisory Early Warning System (Example); A. Credit Shock 1 ("Adjustment for Underprovisioning"); 4. Linking Credit Risk and Macroeconomic Models; B. Credit Shock 2 ("Increase in NPLs"); C. Credit Shock 3 ("Sectoral Shocks").
  • D. Credit Shock 4 ("Concentration Risk")V. Interest Rate Risk; A. Direct Interest Rate Risk; B. Indirect Interest Rate Risk; VI. Foreign Exchange Risk; A. Direct Foreign Exchange Risk; B. Indirect Foreign Exchange Risk; VII. Interbank (Solvency) Contagion Risk; A. "Pure" Interbank Contagion; B. "Macro" Interbank Contagion; VIII. Liquidity Tests and Liquidity Contagion; 4. 'Macro' Interbank Contagion; IX. Scenarios; 5. Results of Liquidity Stress Tests; A. Designing Consistent Scenarios; 5. Can We Add The Impacts of Shocks?; 6. Impact of Stress on Capital Adequacy Ratios.
  • 7. 'Worst Case Approach' vs. 'Threshold Approach'B. Linking Stress Tests to Rankings and Probabilities of Default; 6. Picking the 'Right' Scenario; 8. Impact of Stress on Supervisory Ratings; 9. Impact of Stress on Banks' Probabilities of Default; 10. Impact of Stress on Banks' Z-Scores; C. Modeling the Feedback Effects; X. Conclusions and Extensions; 11. Capital Injections Needed to Bring Banks to Minimum Capital Adequacy; Appendixes; I. Questions for the Hands-On Exercise; II. Stress Testing in Financial Stability Reports; Appendix Tables; 1. Stress Testing in FSRs: Overview, End of 2005.
  • 2. Examples of Stress Tests in Financial Stability ReportsIII. Stress Testing in the Financial Sector Assessment Program; 3. Evolving Role of Stress Testing in FSAP, 2000-2005; 4. Who Did the Calculations in European FSAP Stress Tests?; 5. Institutions Covered in European FSAP Stress Tests; 6. Approach to Credit Risk Modeling in European FSAP Stress Tests; 7. Interest Rate Shocks in European FSAP Stress Tests; 8. Approaches to Interest Rate Modeling in European FSAP Stress Tests; 9. Exchange Rate Shocks in European FSAP Stress Tests.

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