Stress testing for risk control under Basel II / Dimitris N. Chorafas.

Format:

Book

Author/Creator:

Chorafas, Dimitris N.

Series:

Elsevier finance.

Elsevier finance

Language:

English

Subjects (All):

Financial risk management.

Risk management.

Physical Description:

1 online resource (355 p.)

Edition:

1st ed.

Place of Publication:

Oxford ; Burlington, MA : Butterworth-Heinemann, 2007.

Language Note:

English

Summary:

The Consultative paper issued by the Basel Committee on Banking Supervision (Basel II) cites the failure of bankers to adequately stress test exposures as a major reason for bad loans. Sample quotes from this crucial document: * ""Banks should take into consideration potential future changes in economic conditions when assessing individual credits and their credit portfolios, and should assess their credit risk exposures under stressful conditions."" * ""The recent disturbances in Asia and Russia illustrate how close linkages among emerging markets under stress conditions and previously

Contents:

Front Cover; Stress Testing for Risk Control under Basel II; Copyright Page; Table of Contents; Preface; Warning; Part 1 Stress testing defined; Chapter 1 The need for advanced testing methodology; 1.1 Introduction; 1.2 Risk distributions and extreme events; 1.3 Model uncertainty in simulation and testing; 1.4 Stress testing and the need for transparency; 1.5 Stress testing and confidence intervals; 1.6 Advanced testing methodology for better governance; 1.7 An introduction to the role of information technology in gaining competitiveness; Notes; Chapter 2 Risk and its management

2.1 Introduction 2.2 Risk defined; 2.3 Risk associated with the counterparty; 2.4 Market risk and its variants; 2.5 Risk appetite and risk aversion; 2.6 Systemic risk and event risk; 2.7 Developing a system for risk management; Notes; Chapter 3 The dynamics of stress testing; 3.1 Introduction; 3.2 Stress testing defined; 3.3 Advanced testing and new financial instruments; 3.4 What is the benefit of stress testing?; 3.5 Scenarios, sensitivity analysis and statistical inference; 3.6 Capital at risk under extreme conditions: an example; 3.7 Stress testing and the devil's advocate

3.8 Advice on implementing the stress test Notes; Chapter 4 Stress analysis and its tools; 4.1 Introduction; 4.2 The need for a scientific approach; 4.3 Science and the scientific method; 4.4 Fundamentals of stress analysis; 4.5 Case studies with scenario analysis; 4.6 Using the Delphi method; 4.7 Stress evaluation through sensitivity analysis; 4.8 Fundamentals of statistical inference; Notes; Chapter 5 Worst case scenarios and drills; 5.1 Introduction; 5.2 Worst cases happen when chance meets unpreparedness; 5.3 A bird's-eye view of worst case analysis

5.4 Impaired claims, credit risk and worst case 5.5 Why are worst case drills important?; 5.6 A catastrophe drill undertaken by the International Monetary Fund in 2002; 5.7 The Federal Reserve's 'new bank' and the carry trade; 5.8 The nature of worst case drills is polyvalent; Notes; Chapter 6 Technology strategy for advanced testing; 6.1 Introduction; 6.2 Managing a successful technology effort; 6.3 Innovation and survival of the fittest; 6.4 A phase-shift technology strategy; 6.5 Re-engineering information technology is not an option; it is a 'must'

6.6 Projecting and implementing an enterprise architecture 6.7 Strategic planning should account for information technology's deliverables; Notes; Part 2 Stress testing probability of default, loss given default and exposure at default; Chapter 7 Models and procedures for the study of volatility patterns; 7.1 Introduction; 7.2 Volatility defined; 7.3 Keeping volatility in perspective; 7.4 Improving volatility models through heteroschedasticity; 7.5 Procedural insufficiency among financial institutions and individual investors; 7.6 Algorithmic insufficiency: a case study with value at risk

7.7 The volatility of credit ratings: a case study with General Motors and General Motors Acceptance Corporation

Notes:

Includes index.

ISBN:

1-280-72961-9

9786610729616

0-08-046705-9

OCLC:

437175622