Shock on Variable or Shock on Distribution with Application to Stress-Tests
AbstractThe shocks on a stochastic system can be defined by means of either distribution, or variable. We relate these approaches and provide the link between the global and local effects of both types of shocks. These methodologies are used to perform stress-tests on the portfolio of financial institutions by means of shocks on systematic factors, for which we distinguish the cases of crystallized and optimally updated portfolios. The approach is illustrated by an analysis of the risk of sovereign bonds of the Eurozone.
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Bibliographic InfoPaper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2012-03.
Date of creation: Feb 2012
Date of revision:
Shock; Copula; Extreme Risk; Stress-Test; Factor Model; Systemic Risk; Portfolio Management; Sovereign Bonds;
Other versions of this item:
- Dubecq, S. & Gourieroux, C., 2012. "Shock on Variable or Shock on Distribution with Application to Stress-Tests," Working papers 368, Banque de France.
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
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