Designing Effective Macroprudential Stress Tests

Designing Effective Macroprudential Stress Tests Book in PDF, ePub and Kindle version is available to download in english. Read online anytime anywhere directly from your device. Click on the download button below to get a free pdf file of Designing Effective Macroprudential Stress Tests book. This book definitely worth reading, it is an incredibly well-written.

Designing Effective Macroprudential Stress Tests

Mr.Dimitri G. Demekas
Designing Effective Macroprudential Stress Tests Book PDF

Author : Mr.Dimitri G. Demekas
Publisher : International Monetary Fund
Page : 34 pages
File Size : 52,5 Mb
Release : 2015-06-30
Category : Business & Economics
ISBN : 9781513513621

Get Book

Designing Effective Macroprudential Stress Tests by Mr.Dimitri G. Demekas Pdf

Giving stress tests a macroprudential perspective requires (i) incorporating general equilibrium dimensions, so that the outcome of the test depends not only on the size of the shock and the buffers of individual institutions but also on their behavioral responses and their interactions with each other and with other economic agents; and (ii) focusing on the resilience of the system as a whole. Progress has been made toward the first goal: several models are now available that attempt to integrate solvency, liquidity, and other sources of risk and to capture some behavioral responses and feedback effects. But building models that measure correctly systemic risk and the contribution of individual institutions to it while, at the same time, relating the results to the established regulatory framework has proved more difficult. Looking forward, making macroprudential stress tests more effective would entail using a variety of analytical approaches and scenarios, integrating non-bank financial entities, and exploring the use of agent-based models. As well, macroprudential stress tests should not be used in isolation but be treated as complements to other tools and—crucially—be combined with microprudential perspectives.

Macroprudential Stress Tests and Policies: Searching for Robust and Implementable Frameworks

Ron Anderson,Jon Danielsson,Chikako Baba,Mr.Udaibir S Das,Mr.Heedon Kang,Miguel A. Segoviano Basurto
Macroprudential Stress Tests and Policies Searching for Robust and Implementable Frameworks Book PDF

Author : Ron Anderson,Jon Danielsson,Chikako Baba,Mr.Udaibir S Das,Mr.Heedon Kang,Miguel A. Segoviano Basurto
Publisher : International Monetary Fund
Page : 79 pages
File Size : 47,8 Mb
Release : 2018-09-11
Category : Business & Economics
ISBN : 9781484375839

Get Book

Macroprudential Stress Tests and Policies: Searching for Robust and Implementable Frameworks by Ron Anderson,Jon Danielsson,Chikako Baba,Mr.Udaibir S Das,Mr.Heedon Kang,Miguel A. Segoviano Basurto Pdf

Macroprudential stress testing (MaPST) is becoming firmly embedded in the post-crisis policy-frameworks of financial-sectors around the world. MaPSTs can offer quantitative, forward-looking assessments of the resilience of financial systems as a whole, to particularly adverse shocks. Therefore, they are well suited to support the surveillance of macrofinancial vulnerabilities and to inform the use of macroprudential policy-instruments. This report summarizes the findings of a joint-research effort by MCM and the Systemic-Risk-Centre, which aimed at (i) presenting state-of-the-art approaches on MaPST, including modeling and implementation-challenges; (ii) providing a roadmap for future-research, and; (iii) discussing the potential uses of MaPST to support policy.

Towards Macroprudential Stress Testing

Mr.Ivo Krznar,Mr.Troy D Matheson
Towards Macroprudential Stress Testing Book PDF

Author : Mr.Ivo Krznar,Mr.Troy D Matheson
Publisher : International Monetary Fund
Page : 49 pages
File Size : 52,5 Mb
Release : 2017-06-30
Category : Business & Economics
ISBN : 9781484303634

Get Book

Towards Macroprudential Stress Testing by Mr.Ivo Krznar,Mr.Troy D Matheson Pdf

Macro-feedback effects have been identified as a key missing element for more effective macro-prudential stress testing. To fill this gap, this paper develops a framework that facilitates the analysis of both the direct effects of macroeconomic shocks on the solvency of individual banks and feedback effects that allow for the amplification and propagation of shocks that can result from bank deleveraging and credit crunches. The framework ensures consistency in the key relationships between macroeconomic and financial variables, and banks’ balance sheets. This is accomplished by embedding a standard stress-testing framework based on individual banks’ data in a semi-structural macroeconomic model. The framework has numerous applications that can strengthen stress testing and macro financial analysis. Moreover, it provides an avenue for many extensions that address the challenges of incorporating other second-round effects important for comprehensive systemic risk analysis, such as interactions between solvency, liquidity and contagion risks. To this end, the paper presents some preliminary simulations of feedback effects arising from the link between the liquidity and solvency risk.

Macroprudential Stress Tests: A Reduced-Form Approach to Quantifying Systemic Risk Losses

Zineddine Alla,Mr.Raphael A Espinoza,Qiaoluan H. Li,Miguel A. Segoviano Basurto
Macroprudential Stress Tests A Reduced Form Approach to Quantifying Systemic Risk Losses Book PDF

Author : Zineddine Alla,Mr.Raphael A Espinoza,Qiaoluan H. Li,Miguel A. Segoviano Basurto
Publisher : International Monetary Fund
Page : 45 pages
File Size : 47,8 Mb
Release : 2018-03-09
Category : Business & Economics
ISBN : 9781484345344

Get Book

Macroprudential Stress Tests: A Reduced-Form Approach to Quantifying Systemic Risk Losses by Zineddine Alla,Mr.Raphael A Espinoza,Qiaoluan H. Li,Miguel A. Segoviano Basurto Pdf

We present a novel approach that incorporates individual entity stress testing and losses from systemic risk effects (SE losses) into macroprudential stress testing. SE losses are measured using a reduced-form model to value financial entity assets, conditional on macroeconomic stress and the distress of other entities in the system. This valuation is made possible by a multivariate density which characterizes the asset values of the financial entities making up the system. In this paper this density is estimated using CIMDO, a statistical approach, which infers densities that are consistent with entities’ probabilities of default, which in this case are estimated using market-based data. Hence, SE losses capture the effects of interconnectedness structures that are consistent with markets’ perceptions of risk. We then show how SE losses can be decomposed into the likelihood of distress and the magnitude of losses, thereby quantifying the contribution of specific entities to systemic contagion. To illustrate the approach, we quantify SE losses due to Lehman Brothers’ default.

Credibility and Crisis Stress Testing

Ms.Li L. Ong,Ceyla Pazarbasioglu
Credibility and Crisis Stress Testing Book PDF

Author : Ms.Li L. Ong,Ceyla Pazarbasioglu
Publisher : International Monetary Fund
Page : 64 pages
File Size : 49,7 Mb
Release : 2013-08-09
Category : Business & Economics
ISBN : 9781475527063

Get Book

Credibility and Crisis Stress Testing by Ms.Li L. Ong,Ceyla Pazarbasioglu Pdf

Credibility is the bedrock of any crisis stress test. The use of stress tests to manage systemic risk was introduced by the U.S. authorities in 2009 in the form of the Supervisory Capital Assessment Program. Since then, supervisory authorities in other jurisdictions have also conducted similar exercises. In some of those cases, the design and implementation of certainelements of the framework have been criticized for their lack of credibility. This paper proposes a set of guidelines for constructing an effective crisis stress test. It combines financial markets impact studies of previous exercises with relevant case study information gleaned from those experiences to identify the key elements and to formulate their appropriate design. Pertinent concepts, issues and nuances particular to crisis stress testing are also discussed. The findings may be useful for country authorities seeking to include stress tests in their crisis management arsenal, as well as for the design of crisis programs.

Macroprudential Solvency Stress Testing of the Insurance Sector

Mr.Andreas A. Jobst,Nobuyasu Sugimoto,Timo Broszeit
Macroprudential Solvency Stress Testing of the Insurance Sector Book PDF

Author : Mr.Andreas A. Jobst,Nobuyasu Sugimoto,Timo Broszeit
Publisher : International Monetary Fund
Page : 84 pages
File Size : 55,8 Mb
Release : 2014-07-22
Category : Business & Economics
ISBN : 9781498324557

Get Book

Macroprudential Solvency Stress Testing of the Insurance Sector by Mr.Andreas A. Jobst,Nobuyasu Sugimoto,Timo Broszeit Pdf

Over the last decade, stress testing has become a central aspect of the Fund’s bilateral and multilateral surveillance work. Recently, more emphasis has also been placed on the role of insurance for financial stability analysis. This paper reviews the current state of system-wide solvency stress tests for insurance based on a comparative review of national practices and the experiences from Fund’s FSAP program with the aim of providing practical guidelines for the coherent and consistent implementation of such exercises. The paper also offers recommendations on improving the current insurance stress testing approaches and presentation of results.

Handbook of Financial Stress Testing

J. Doyne Farmer,Alissa M. Kleinnijenhuis,Til Schuermann,Thom Wetzer
Handbook of Financial Stress Testing Book PDF

Author : J. Doyne Farmer,Alissa M. Kleinnijenhuis,Til Schuermann,Thom Wetzer
Publisher : Unknown
Page : 729 pages
File Size : 46,8 Mb
Release : 2022-04-14
Category : Mathematics
ISBN : 9781108830737

Get Book

Handbook of Financial Stress Testing by J. Doyne Farmer,Alissa M. Kleinnijenhuis,Til Schuermann,Thom Wetzer Pdf

Discover current uses and future development of stress tests, the most innovative regulatory tool to prevent and fight financial crises.

Stress Testing at the IMF

Mr.Tobias Adrian,Mr.James Morsink,MissLiliana B Schumacher
Stress Testing at the IMF Book PDF

Author : Mr.Tobias Adrian,Mr.James Morsink,MissLiliana B Schumacher
Publisher : International Monetary Fund
Page : 73 pages
File Size : 43,6 Mb
Release : 2020-02-05
Category : Business & Economics
ISBN : 9781513520742

Get Book

Stress Testing at the IMF by Mr.Tobias Adrian,Mr.James Morsink,MissLiliana B Schumacher Pdf

This paper explains specifics of stress testing at the IMF. After a brief section on the evolution of stress tests at the IMF, the paper presents the key steps of an IMF staff stress test. They are followed by a discussion on how IMF staff uses stress tests results for policy advice. The paper concludes by identifying remaining challenges to make stress tests more useful for the monitoring of financial stability and an overview of IMF staff work program in that direction. Stress tests help assess the resilience of financial systems in IMF member countries and underpin policy advice to preserve or restore financial stability. This assessment and advice are mainly provided through the Financial Sector Assessment Program (FSAP). IMF staff also provide technical assistance in stress testing to many its member countries. An IMF macroprudential stress test is a methodology to assess financial vulnerabilities that can trigger systemic risk and the need of systemwide mitigating measures. The definition of systemic risk as used by the IMF is relevant to understanding the role of its stress tests as tools for financial surveillance and the IMF’s current work program. IMF stress tests primarily apply to depository intermediaries, and, systemically important banks.

Stress Testing Financial Systems

Mr.Matthew T Jones,Mr.Paul Louis Ceriel Hilbers
Stress Testing Financial Systems Book PDF

Author : Mr.Matthew T Jones,Mr.Paul Louis Ceriel Hilbers
Publisher : International Monetary Fund
Page : 18 pages
File Size : 55,7 Mb
Release : 2004-09-27
Category : Business & Economics
ISBN : 158906402X

Get Book

Stress Testing Financial Systems by Mr.Matthew T Jones,Mr.Paul Louis Ceriel Hilbers Pdf

Stress testing is becoming a widely used tool to assess potential vulnerabilities in a financial system. This booklet is intended to answer some of the basic questions that may arise as part of the process of stress testing. The pamphlet begins with a discussion of stress testing in a financial system context, highlighting some of the differences between stress tests of systems and of individual portfolios. The booklet provides an overview of the process itself, from identifying vulnerabilities, to constructing scenarios, to interpreting the results. The experience of the IMF in conducting stress testing as part of the Financial Sector Assessment Program (FSAP) is also discussed.

Stress Testing and Calibration of Macroprudential Policy Tools

Lucyna Gornicka,Laura Valderrama
Stress Testing and Calibration of Macroprudential Policy Tools Book PDF

Author : Lucyna Gornicka,Laura Valderrama
Publisher : Unknown
Page : 54 pages
File Size : 43,6 Mb
Release : 2020-08-14
Category : Electronic
ISBN : 1513554476

Get Book

Stress Testing and Calibration of Macroprudential Policy Tools by Lucyna Gornicka,Laura Valderrama Pdf

We present a semi-structural model of default risk, which is a function of loan and borrower characteristics, economic conditions, and the regulatory environment. We use this model to simulate bank credit losses for stress-testing purposes and to calibrate borrower-based macroprudential tools. The proposed approach is very flexible and is particularly useful when there is limited history of crisis episodes, when crises bring unanticipated shocks where past tail events offer little guidance and when structural shocks or changes in financial regulations have altered the loan default process. We apply the model to quantify mortgage lending risk in two distinct mortgage markets. For each application, we show a range of modeling adjustments that can be made to capture country-specific institutional features. The model uses bank portfolio data broken down by risk bucket and vintage, which enables us to take explicit account of the loan life cycle and to incorporate the housing and economic cycles. This feature facilitates a timely assessment of banks' loss-absorbing capacity and the buildup of systemic risk conditional on policy. It also enables counterfactual analysis and the evaluation of macroprudential policy interventions.

Stress-testing the Banking System

Mario Quagliariello
Stress testing the Banking System Book PDF

Author : Mario Quagliariello
Publisher : Cambridge University Press
Page : 355 pages
File Size : 41,6 Mb
Release : 2009-10-15
Category : Business & Economics
ISBN : 9781139482837

Get Book

Stress-testing the Banking System by Mario Quagliariello Pdf

Stress tests are used in risk management by banks in order to determine how certain crisis scenarios would affect the value of their portfolios, and by public authorities for financial stability purposes. Until the first half of 2007, interest in stress-testing was largely restricted to practitioners. Since then, the global financial system has been hit by deep turbulences, including the fallout from sub-prime mortgage lending. Many observers have pointed out that the severity of the crisis has been largely due to its unexpected nature and have claimed that a more extensive use of stress-testing methodologies would have helped to alleviate the repercussions of the crisis. This book analyses the theoretical underpinnings, as well as the practical aspects, of applying such methodologies. Building on the experience gained by the economists of many national and international financial authorities, it provides an updated toolkit for both practitioners and academics.

Revisiting Risk-Weighted Assets

Vanessa Le Leslé,Ms.Sofiya Avramova
Revisiting Risk Weighted Assets Book PDF

Author : Vanessa Le Leslé,Ms.Sofiya Avramova
Publisher : International Monetary Fund
Page : 50 pages
File Size : 49,9 Mb
Release : 2012-03-01
Category : Business & Economics
ISBN : 9781475502657

Get Book

Revisiting Risk-Weighted Assets by Vanessa Le Leslé,Ms.Sofiya Avramova Pdf

In this paper, we provide an overview of the concerns surrounding the variations in the calculation of risk-weighted assets (RWAs) across banks and jurisdictions and how this might undermine the Basel III capital adequacy framework. We discuss the key drivers behind the differences in these calculations, drawing upon a sample of systemically important banks from Europe, North America, and Asia Pacific. We then discuss a range of policy options that could be explored to fix the actual and perceived problems with RWAs, and improve the use of risk-sensitive capital ratios.

The Use and Effectiveness of Macroprudential Policies: New Evidence

Eugenio Cerutti,Stijn Claessens,Mr. Luc Laeven
The Use and Effectiveness of Macroprudential Policies New Evidence Book PDF

Author : Eugenio Cerutti,Stijn Claessens,Mr. Luc Laeven
Publisher : International Monetary Fund
Page : 43 pages
File Size : 42,5 Mb
Release : 2015-03-17
Category : Business & Economics
ISBN : 9781498316378

Get Book

The Use and Effectiveness of Macroprudential Policies: New Evidence by Eugenio Cerutti,Stijn Claessens,Mr. Luc Laeven Pdf

Using a recent IMF survey and expanding on previous studies, we document the use of macroprudential policies for 119 countries over the 2000-13 period, covering many instruments. Emerging economies use macroprudential policies most frequently, especially foreign exchange related ones, while advanced countries use borrower-based policies more. Usage is generally associated with lower growth in credit, notably in household credit. Effects are less in financially more developed and open economies, however, and usage comes with greater cross-border borrowing, suggesting some avoidance. And while macroprudential policies can help manage financial cycles, they work less well in busts.

Macroprudential Policy - An Organizing Framework - Background Paper

International Monetary Fund. Monetary and Capital Markets Department
Macroprudential Policy An Organizing Framework Background Paper Book PDF

Author : International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 33 pages
File Size : 52,9 Mb
Release : 2011-03-14
Category : Business & Economics
ISBN : 9781498339179

Get Book

Macroprudential Policy - An Organizing Framework - Background Paper by International Monetary Fund. Monetary and Capital Markets Department Pdf

MCM conducted a survey in December 2010 to take stock of international experiences with financial stability and the evolving macroprudential policy framework. The survey was designed to seek information in three broad areas: the institutional setup for macroprudential policy, the analytical approach to systemic risk monitoring, and the macroprudential policy toolkit. The survey was sent to 63 countries and the European Central Bank (ECB), including all countries in the G-20 and those subject to mandatory Financial Sector Assessment Programs (FSAPs). The target list is designed to cover a broad range of jurisdictions in all regions, but more weight is given to economies that are systemically important (see Annex for details). The response rate is 80 percent. This note provides a summary of the survey’s main findings.

Reverse Stress Testing in Banking

Michael Eichhorn,Tiziano Bellini,Daniel Mayenberger
Reverse Stress Testing in Banking Book PDF

Author : Michael Eichhorn,Tiziano Bellini,Daniel Mayenberger
Publisher : Walter de Gruyter GmbH & Co KG
Page : 483 pages
File Size : 55,7 Mb
Release : 2021-05-10
Category : Business & Economics
ISBN : 9783110644951

Get Book

Reverse Stress Testing in Banking by Michael Eichhorn,Tiziano Bellini,Daniel Mayenberger Pdf

Reverse stress testing was introduced in risk management as a regulatory tool for financial institutions more than a decade ago. The recent Covid-19 crisis illustrates its relevance and highlights the need for a systematic re-thinking of tail risks in the banking sector. This book addresses the need for practical guidance describing the entire reverse stress testing process. Reverse Stress Testing in Banking features contributions from a diverse range of established practitioners and academics. Organized in six parts, the book presents a series of contributions providing an in-depth understanding of: Regulatory requirements and ways to address them Quantitative and qualitative approaches to apply reverse stress testing at different levels – from investment portfolios and individual banks to the entire banking system The use of artificial intelligence, machine learning and quantum computing to gain insights into and address banks’ structural weaknesses Opportunities to co-integrate reverse stress testing with recovery and resolution planning Governance and processes for board members and C-suite executives Readers will benefit from the case studies, use cases from practitioners, discussion questions, recommendations and innovative practices provided in this insightful and pioneering book.