Stress Testing Models: A Strategic Risk Management Tool
AbstractThis paper discusses the role of models in conducting stress-tests for regulatory and risk management purposes, and presents some approaches that may enhance their ability to estimate outcomes in a stressful environment. Unlike a conventional model that is designed for a steady state environment, we argue that a stress-testing model needs to be developed with a different design to capture the implications of abnormal business and economic conditions. Developing such a model may require a combination of qualitative and quantitative adjustments to capture the stress or boundary conditions. Consequently, the governance needs of stress-testing models require more rigor than steady state models to effectively challenge the underlying construct and assumptions. It is critical that senior management appreciate these nuances before using the output of such models for key strategic decisions.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by EY Global FS Institute in its journal Journal of Financial Perspectives.
Volume (Year): 1 (2013)
Issue (Month): 2 ()
Contact details of provider:
Postal: 1 More London Place, London SE1 2AF, UK
Phone: +44 20 7951 2000
Web page: http://www.gfsi.ey.com/
stres testing; banking; financial crisis;
Find related papers by JEL classification:
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Shahin Shojai).
If references are entirely missing, you can add them using this form.