IDEAS home Printed from https://ideas.repec.org/p/mnb/wpaper/2008-2.html
   My bibliography  Save this paper

Macro stress testing with sector specific bankruptcy models

Author

Listed:
  • Marianna Valentinyi-Endrész

    (Magyar Nemzeti Bank)

  • Zoltán Vásáry

    (Magyar Nemzeti Bank)

Abstract

This paper employs the methodology of Wilson (1997) on Hungarian data to conduct a macro stress test in relation to banks’ corporate loan portfolio. First, sector specific models of bankruptcy are estimated, where the bankruptcy frequency is linked to the general health of the economy. Data on bankruptcy filings in Hungary between 1995 and 2005 are used. Then, after identifying relevant shocks, the estimated models are employed in Monte Carlo simulation to conduct a stress test on the Hungarian banking sector. Various loss measures are defined to quantify the impact of shocks and evaluate the resilience of the Hungarian banking sector. The sensitivity of the stress test results to the endogeneity of LGD and the prevailing macro environment are also examined.

Suggested Citation

  • Marianna Valentinyi-Endrész & Zoltán Vásáry, 2008. "Macro stress testing with sector specific bankruptcy models," MNB Working Papers 2008/2, Magyar Nemzeti Bank (Central Bank of Hungary).
    • Handle: RePEc:mnb:wpaper:2008/2
    as

    Download full text from publisher

    File URL: http://www.mnb.hu/letoltes/wp2008-2.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    credit risk; bankruptcy; macro stress testing.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mnb:wpaper:2008/2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lorant Kaszab (email available below). General contact details of provider: https://edirc.repec.org/data/mnbgvhu.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.