Next Generation Balance Sheet Stress Testing
AbstractThis paper presents a "second-generation" solvency stress testing framework extending applied stress testing work centered on Cih�k (2007). The framework seeks enriching stress tests in terms of risk-sensitivity, while keeping them flexible, transparent, and user-friendly. The main contributions include (a) increasing the risk-sensitivity of stress testing by capturing changes in risk-weighted assets (RWAs) under stress, including for non-internal ratings based (IRB) banks (through a quasi-IRB approach); (b) providing stress testers with a comprehensive platform to use satellite models, and to define various assumptions and scenarios; (c) allowing stress testers to run multi-year scenarios (up to five years) for hundreds of banks, depending on the availability of data. The framework uses balance sheet data and is Excel-based with detailed guidance and documentation.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 11/83.
Date of creation: 01 Apr 2011
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-14 (All new papers)
- NEP-BAN-2011-05-14 (Banking)
- NEP-RMG-2011-05-14 (Risk Management)
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