EconPapers    
Economics at your fingertips  
 

A formalized, integrated and visual approach to stress testing

Alexander Denev () and Yaacov Mutnikas ()
Additional contact information
Alexander Denev: IHS Markit
Yaacov Mutnikas: IHS Markit

Risk Management, 2016, vol. 18, issue 4, 189-216

Abstract: Abstract In this paper, we will give for the first time a formal mathematical language to the steps used currently by financial institutions when calculating the impact of a stress scenario on a balance sheet that depends on more granular or different factors than those provided in the scenario. We will introduce the language of Probabilistic Graphical Models – a technique rooted in machine learning – to show how the different models used at each step can be put together in a coherent picture, thus giving a holistic view of the entire model setup. This will give us a solid basis to discuss some weaknesses and problems with the stress-testing exercises run by the industry as of today. We will show empirical analyses to substantiate better some of our claims.

Keywords: stress testing; scenario analysis; integrated risk management; probabilistic graphical models; visualization (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1057/s41283-016-0009-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:risman:v:18:y:2016:i:4:d:10.1057_s41283-016-0009-1

Ordering information: This journal article can be ordered from
https://www.palgrave.com/gp/journal/41283

Access Statistics for this article

Risk Management is currently edited by Igor Loncarski

More articles in Risk Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2020-01-08
Handle: RePEc:pal:risman:v:18:y:2016:i:4:d:10.1057_s41283-016-0009-1