Stress Testing and Risk Integration in Banks provides a comprehensive view of the risk management activity by means of the stress testing process. An introduction to multivariate time series modeling paves the way to scenario analysis in order to assess a bank resilience against adverse macroeconomic conditions. Assets and liabilities are jointly studied to highlight the key issues that a risk manager needs to face. A multi-national bank prototype is used all over the book for diving into market, credit, and operational stress testing.
Interest rate, liquidity and other major risks are also studied together with the former to outline how to implement a fully integrated risk management toolkit. Examples, business cases, and exercises worked in Matlab and R facilitate readers to develop their own models and methodologies.
1. Chapter 1: Introduction to Stress Testing and Risk Integration - p. xvii 2. Chapter 2: Macroeconomic Scenario Analysis from a Bank Perspective - p. 23 3. Abstract - p. 23 4. Key Abbreviations and Symbols - p. 26 5. 2.1 Introduction - p. 26 6. 2.2 Autoregression and Moving-Average Modeling - p. 27 7. 2.3 Vector Autoregression and Vector Error-Correction Modeling - p. 34 8. 2.4 Global Vector Autoregression Modeling - p. 47 9. 2.5 Stress Testing Scenario - p. 53 10. 2.6 Summary - p. 60 11. Suggestions for Further Reading - p. 60 12. Appendix. Robust Vector Error Correction Model: A Forward Search Approach - p. 61 13. Exercises - p. 69 14. Chapter 3: Asset and Liability Management, and Value at Risk - p. 71 15. Abstract - p. 71 16. Key Abbreviations and Symbols - p. 74 17. 3.1 Introduction - p. 74 18. 3.2 Margin at Risk - p. 77 19. 3.3 Value at Risk - p. 99 20. 3.4 Liquidity Analysis - p. 109 21. 3.5 Summary - p. 114 22. Suggestions for Further Reading - p. 114 23. Appendix A. Kalman Filter for Affine Term Structure Models - p. 115 24. Appendix B. Robust Kalman Filter: A Forward Search Approach to Estimate Affine Term Structure Models - p. 117 25. Exercises - p. 119 26. Chapter 4: Portfolio Credit Risk Modeling - p. 121 27. Chapter 5: Balance Sheet, and Profit and Loss Stress Testing Projections - p. 161 28. Chapter 6: Regulatory Capital, RWA, Leverage, and Liquidity Requirements Under Stress - p. 193 29. Chapter 7: Risk Integration - p. 234 30. Chapter 8: Reverse Stress Testing - p. 264 31. Index - p. 289
Stress Testing and Risk Integration in Banks provides a comprehensive view of the risk management activity by means of the stress testing process. An introduction to multivariate time series modeling paves the way to scenario analysis in order to assess a bank resilience against adverse macroeconomic conditions. Assets and liabilities are jointly studied to highlight the key issues that a risk manager needs to face. A multi-national bank prototype is used all over the book for diving into market, credit, and operational stress testing.
Interest rate, liquidity and other major risks are also studied together with the former to outline how to implement a fully integrated risk management toolkit. Examples, business cases, and exercises worked in Matlab and R facilitate readers to develop their own models and methodologies.
1. Chapter 1: Introduction to Stress Testing and Risk Integration - p. xvii 2. Chapter 2: Macroeconomic Scenario Analysis from a Bank Perspective - p. 23 3. Abstract - p. 23 4. Key Abbreviations and Symbols - p. 26 5. 2.1 Introduction - p. 26 6. 2.2 Autoregression and Moving-Average Modeling - p. 27 7. 2.3 Vector Autoregression and Vector Error-Correction Modeling - p. 34 8. 2.4 Global Vector Autoregression Modeling - p. 47 9. 2.5 Stress Testing Scenario - p. 53 10. 2.6 Summary - p. 60 11. Suggestions for Further Reading - p. 60 12. Appendix. Robust Vector Error Correction Model: A Forward Search Approach - p. 61 13. Exercises - p. 69 14. Chapter 3: Asset and Liability Management, and Value at Risk - p. 71 15. Abstract - p. 71 16. Key Abbreviations and Symbols - p. 74 17. 3.1 Introduction - p. 74 18. 3.2 Margin at Risk - p. 77 19. 3.3 Value at Risk - p. 99 20. 3.4 Liquidity Analysis - p. 109 21. 3.5 Summary - p. 114 22. Suggestions for Further Reading - p. 114 23. Appendix A. Kalman Filter for Affine Term Structure Models - p. 115 24. Appendix B. Robust Kalman Filter: A Forward Search Approach to Estimate Affine Term Structure Models - p. 117 25. Exercises - p. 119 26. Chapter 4: Portfolio Credit Risk Modeling - p. 121 27. Chapter 5: Balance Sheet, and Profit and Loss Stress Testing Projections - p. 161 28. Chapter 6: Regulatory Capital, RWA, Leverage, and Liquidity Requirements Under Stress - p. 193 29. Chapter 7: Risk Integration - p. 234 30. Chapter 8: Reverse Stress Testing - p. 264 31. Index - p. 289
