Stress testing credit risk portfolios
AbstractIn this study we survey practices and supervisory expectations for stress testing (ST) in a credit risk framework for banking book exposures. We introduce and motivate ST; and discuss the function, supervisory requirements and expectations, credit risk parameters, interpretation results with respect to ST. This includes a typology of ST (uniform testing, risk factor sensitivities, scenario analysis; and historical, statistical and hypothetical scenarios), and procedures for conducting ST. We conclude with a simple and practical stress testing example using a ratings migration based approach.
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Bibliographic InfoArticle provided by Capco Institute in its journal Journal of Financial Transformation.
Volume (Year): 37 (2013)
Issue (Month): ()
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stress testing; credit risk; credit risk portfolio; credit risk framework; banking book exposure;
Find related papers by JEL classification:
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