Conservative Stress Testing: The Role of Regular Verification
This paper focuses on how to calibrate models used to stress test the most important risks in the banking system. Based on the results of a verification of the Czech National Bank’s stress testing methodology, the paper argues that stress tests should be calibrated conservatively and slightly overestimate the risks. However, to ensure that the stress test framework is conservative enough over time, a verification, i.e. comparison of the actual values of key banking sector variables – in particular the capital adequacy ratio – with predictions generated by the stress-testing models should become a standard part of the stress-testing framework.
|Date of creation:||Jul 2010|
|Date of revision:||Jul 2008|
|Contact details of provider:|| Postal: |
Phone: +420 2 222112330
Fax: +420 2 22112304
Web page: http://ies.fsv.cuni.cz/Email:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Petr Jakubik & Jakub Seidler, 2009. "Estimating Expected Loss Given Default," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2008/2009, chapter 0, pages 102-109 Czech National Bank, Research Department.
- Adam Gersl & Petr Jakubik, 2010. "Procyclicality of the Financial System and Simulation of the Feedback Effect," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2009/2010, chapter 0, pages 110-119 Czech National Bank, Research Department.
- Petr Jakubik & Christian Schmieder, 2008. "Stress Testing Credit Risk: Is the Czech Republic Different from Germany?," Working Papers 2008/9, Czech National Bank, Research Department.
- Petr Jakubík & Jaroslav Heřmánek, 2008.
"Stress testing of the czech banking sector,"
Prague Economic Papers,
University of Economics, Prague, vol. 2008(3), pages 195-212.
- Thomas Breuer & Martin Jandacka & Klaus Rheinberger & Martin Summer, 2009.
"How to find plausible, severe, and useful stress scenarios,"
150, Oesterreichische Nationalbank (Austrian Central Bank).
- Thomas Breuer & Martin Jandacka & Klaus Rheinberger & Martin Summer, 2009. "How to Find Plausible, Severe and Useful Stress Scenarios," International Journal of Central Banking, International Journal of Central Banking, vol. 5(3), pages 205-224, September.
When requesting a correction, please mention this item's handle: RePEc:fau:wpaper:wp2010_12. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lenka Herrmannova)
If references are entirely missing, you can add them using this form.