Introduction to Applied Stress Testing
Stress testing is a useful and increasingly popular, yet sometimes misunderstood, method of analyzing the resilience of financial systems to adverse events. This paper aims to help demystify stress tests, and illustrate their strengths and weaknesses. Using an Excel-based exercise with institution-by-institution data, readers are walked through stress testing for credit risk, interest rate and exchange rate risks, liquidity risk and contagion risk, and are guided in the design of stress testing scenarios. The paper also describes the links between stress testing and other analytical tools, such as financial soundness indicators and supervisory early warning systems. Furthermore, it includes surveys of stress testing practices in central banks and the IMF.
|Date of creation:||01 Mar 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
References listed on IDEAS
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.:
- Virolainen , Kimmo, 2004. "Macro stress testing with a macroeconomic credit risk model for Finland," Research Discussion Papers 18/2004, Bank of Finland.
- Helmut Elsinger & Alfred Lehar & Martin Summer, 2006.
"Risk Assessment for Banking Systems,"
INFORMS, vol. 52(9), pages 1301-1314, September.
- Andrew Crockett, 1997. "Why is financial stability a goal of public policy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 5-22.
- Glenn Hoggarth & Andrew Logan & Lea Zicchino, 2005. "Macro stress tests of UK banks," BIS Papers chapters, in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 392-408 Bank for International Settlements.
- Bank for International Settlements, 2005. "Stress testing at major financial institutions: survey results and practice," CGFS Papers, Bank for International Settlements, number 24, Autumn.
- Andrew Crockett, 1997. "Why is financial stability a goal of public policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-36.
- Ivan Baboucek & Martin Jancar, 2005. "Effects of Macroeconomic Shocks to the Quality of the Aggregate Loan Portfolio," Working Papers 2005/01, Czech National Bank, Research Department.
- Kexue Liu & Jean Salvati & Renzo G. Avesani & Alin Mirestean, 2006. "Review and Implementation of Credit Risk Models of the Financial Sector Assessment Program (FSAP)," IMF Working Papers 06/134, International Monetary Fund.
- Snorre Evjen & Arild J Lund & Kjersti Haare Morka & Kjell B Nordal & Ingvild Svendsen, 2005. "Monetary and financial stability in Norway: what can we learn from macroeconomic stress tests?," BIS Papers chapters, in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 409-30 Bank for International Settlements.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:07/59. 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: (Jim Beardow)or (Hassan Zaidi)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.