Shock on Variable or Shock on Distribution with Application to Stress-Tests

Simon Dubecq () and Christian Gourieroux

No 2012-03, Working Papers from Center for Research in Economics and Statistics

Abstract: The shocks on a stochastic system can be defined by means of either distribution, or variable. We relate these approaches and provide the link between the global and local effects of both types of shocks. These methodologies are used to perform stress-tests on the portfolio of financial institutions by means of shocks on systematic factors, for which we distinguish the cases of crystallized and optimally updated portfolios. The approach is illustrated by an analysis of the risk of sovereign bonds of the Eurozone.

Keywords: Shock; Copula; Extreme Risk; Stress-Test; Factor Model; Systemic Risk; Portfolio Management; Sovereign Bonds (search for similar items in EconPapers)
Pages: 48
Date: 2012-02
New Economics Papers: this item is included in nep-rmg
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Working Paper: Shock on Variable or Shock on Distribution with Application to Stress-Tests (2012)
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