An Lonn Dubh: A Framework for Macroprudential Stress Testing of Investment Funds

Paweł Fiedor () and Petros Katsoulis
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Petros Katsoulis: University of London

No 2/FS/19, Financial Stability Notes from Central Bank of Ireland

Abstract: We have developed a macroprudential stress testing framework of investment funds. This framework is a tool specifically designed to engage with the Bank’s data, and allows financial stability analysts to rapidly prototype stress tests. This enables the Bank to assess financial stability concerns within the investment funds sector in a targeted and timely manner. Further to the description of the architecture of the framework, we present the results of a baseline stress test, which acts as an initial implementation of the framework. These results show that contagion among investment funds is expected to be limited under normal market conditions. However, under heightened market illiquidity and increased investor sensitivity to fund returns we document the potential for significant spillovers and indirect contagion due to common asset holdings in the investment funds sector domiciled in Ireland.

Date: 2019-04
New Economics Papers: this item is included in nep-mac
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