Approaches to stress testing for regulatory purposes by institutions using the IRBA method

Konstrukce stres testu pro regulatorní účely modelem VEC

Michal Kováč

Český finanční a účetní časopis, 2018, vol. 2018, issue 2, 43-59

Abstract: The paper deals with the stress test of institutions using IRBA method for determining the capital requirement. The VEC model was used to quantify the links between the macroeconomic variables and the risk parameters of PD, EAD and LGD. In addition to the construction of the VEC model itself, the paper presents the process of selecting appropriate macroeconomic variables and aggregating risk parameters. To design the stress scenario, the method of maximum penalizing the risk parameters of PD was used because of the failure to prove the links between the macroeconomic variables and the EAD and LGD parameters. Empirical analysis of individual variables and subsequent quantification of capital for stress test purposes was performed on the real portfolio of the retail client.

Keywords: Stress test; Retail clients; VECM; IRBA; Stres test; Retail klientela (search for similar items in EconPapers)
JEL-codes: C53 G32 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.18267/j.cfuc.512

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