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Deconstructing Systemic Risk: A Reverse Stress Testing Approach

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Javier Ojea-Ferreiro

    (Joint Research Centre of the European Commission (JRC)
    Complutense Institute of Economic Analysis, Quantitative Economics Department 28223)

Abstract

This chapter proposes a methodology based on a reverse stress test exercise to shed light on key questions related to systemic risk like the quantification of the losses in an adverse scenario, its probability of occurrence and the role of main contributors. We combine several measures implied by the Expected Shortfall to get time series and cross section information regarding systemic risk. We explore how these results could change depending on key parameters in a Gaussian framework.

Suggested Citation

  • Javier Ojea-Ferreiro, 2021. "Deconstructing Systemic Risk: A Reverse Stress Testing Approach," Springer Books, in: Marco Corazza & Manfred Gilli & Cira Perna & Claudio Pizzi & Marilena Sibillo (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, pages 369-375, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-78965-7_54
    DOI: 10.1007/978-3-030-78965-7_54
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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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