Stress testing in practive: a survey of 43 major financial institutions
Ingo Fender and
Michael S Gibson
BIS Quarterly Review, 2001
Over the last couple of years large, internationally active financial institutions have engaged in increasingly complex and diverse activities. This tendency towards greater complexity, together with the experience of recent financial market crises, has reinforced an already large and growing interest in how these institutions measure and monitor their risk exposures. A specific set of risk management techniques, called “stress testing”, has attracted particular attention among both practitioners and regulators.26 Stress tests are tools used by financial firms to gauge their potential vulnerability to exceptional but plausible events. Typically, a stress test estimates how the value of the firm’s portfolio would change if a particular market event were to occur. In recent years, stress testing has grown in importance, being used as a supplement to frameworks based on value-at-risk (VaR) and other risk measurement tools.
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Persistent link: https://EconPapers.repec.org/RePEc:bis:bisqtr:0106g
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