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Stress tests to promote financial stability: Assessing progress and looking to the future

Author

Listed:
  • Bookstaber, Rick
  • Cetina, Jill
  • Feldberg, Greg
  • Flood, Mark
  • Glasserman, Paul

Abstract

Stress testing, which has its roots in risk management, should be adapted to support financial stability monitoring and to incorporate the interconnections and dynamics of the financial system. Since the 2008 financial crisis, bank supervisors have honed their financial stability monitoring tools and significantly expanded the use of stress testing in the supervision of the largest financial institutions. This paper describes areas in which further research could contribute to the development of best practices in stress testing and how stress tests can be made more useful for macroprudential supervision. Both near-term and longer-term objectives are discussed.

Suggested Citation

  • Bookstaber, Rick & Cetina, Jill & Feldberg, Greg & Flood, Mark & Glasserman, Paul, 2013. "Stress tests to promote financial stability: Assessing progress and looking to the future," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 7(1), pages 16-25, December.
    • Handle: RePEc:aza:rmfi00:y:2013:v:7:i:1:p:16-25
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    Citations

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    Cited by:

    1. Budnik, Katarzyna & Groß, Johannes & Vagliano, Gianluca & Dimitrov, Ivan & Lampe, Max & Panos, Jiri & Velasco, Sofia & Boucherie, Louis & Jančoková, Martina, 2023. "BEAST: A model for the assessment of system-wide risks and macroprudential policies," Working Paper Series 2855, European Central Bank.
    2. Dror Y. Kenett & Sary Levy-Carciente & Adam Avakian & H. Eugene Stanley & Shlomo Havlin, 2015. "Dynamical Macroprudential Stress Testing Using Network Theory," Working Papers 15-12, Office of Financial Research, US Department of the Treasury.
    3. Mark D. Flood & George G. Korenko, 2015. "Systematic scenario selection: stress testing and the nature of uncertainty," Quantitative Finance, Taylor & Francis Journals, vol. 15(1), pages 43-59, January.
    4. Michel Baes & Eric Schaanning, 2023. "Reverse stress testing: Scenario design for macroprudential stress tests," Mathematical Finance, Wiley Blackwell, vol. 33(2), pages 209-256, April.
    5. Pascal Traccucci & Luc Dumontier & Guillaume Garchery & Benjamin Jacot, 2019. "A Triptych Approach for Reverse Stress Testing of Complex Portfolios," Papers 1906.11186, arXiv.org.
    6. Office of Financial Research (ed.), 2013. "2013 Annual Report," Reports, Office of Financial Research, US Department of the Treasury, number 13-02, September.
    7. repec:ofr:wpaper:13-10 is not listed on IDEAS
    8. Pavel Kapinos & Oscar A. Mitnik, 2016. "A Top-down Approach to Stress-testing Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 49(2), pages 229-264, June.
    9. Levy-Carciente, Sary & Kenett, Dror Y. & Avakian, Adam & Stanley, H. Eugene & Havlin, Shlomo, 2015. "Dynamical macroprudential stress testing using network theory," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 164-181.
    10. Larry Wall, 2014. "Measuring capital adequacy: supervisory stress-tests in a Basel world," Journal of Financial Perspectives, EY Global FS Institute, vol. 2(1), pages 85-94.
    11. repec:ofr:report:13-2 is not listed on IDEAS

    More about this item

    Keywords

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    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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