Stress Testing and Risk Integration in Banks
A Statistical Framework and Practical Software Guide (in Matlab and R)
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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.
Key Features
- Provides a rigorous statistical framework for modeling stress test in line with U.S. Federal Reserve FRB CCAR (Comprehensive Capital Analysis Review), U.K. PRA (Prudential Regulatory Authority), EBA (European Baning Authorithy) and comply with Basel Accord requirements
- Follows an integrated bottom-up approach central in the most advanced risk modelling practice
- Provides numerous sample codes in Matlab and R
Readership
Graduate students and professionals worldwide, students specializing in banking, and bank regulation professionals
Table of Contents
- Dedication
- Tiziano Bellini's Biography
- Preface
- Acknowledgments
- Chapter 1: Introduction to Stress Testing and Risk Integration
- Abstract
- 1.1 Antidote to the Crisis
- 1.2 Stress Testing, Risk Integration, and Reverse Stress Testing
- 1.3 Book Structure at a Glance
- 1.4 Summary
- Chapter 2: Macroeconomic Scenario Analysis from a Bank Perspective
- Abstract
- Key Abbreviations and Symbols
- 2.1 Introduction
- 2.2 Autoregression and Moving-Average Modeling
- 2.3 Vector Autoregression and Vector Error-Correction Modeling
- 2.4 Global Vector Autoregression Modeling
- 2.5 Stress Testing Scenario
- 2.6 Summary
- Suggestions for Further Reading
- Appendix. Robust Vector Error Correction Model: A Forward Search Approach
- Exercises
- Chapter 3: Asset and Liability Management, and Value at Risk
- Abstract
- Key Abbreviations and Symbols
- 3.1 Introduction
- 3.2 Margin at Risk
- 3.3 Value at Risk
- 3.4 Liquidity Analysis
- 3.5 Summary
- Suggestions for Further Reading
- Appendix A. Kalman Filter for Affine Term Structure Models
- Appendix B. Robust Kalman Filter: A Forward Search Approach to Estimate Affine Term Structure Models
- Exercises
- Chapter 4: Portfolio Credit Risk Modeling
- Abstract
- Key Abbreviations and Symbols
- 4.1 Introduction
- 4.2 Credit Portfolio Modeling
- 4.3 Credit Risk-Weighted Assets
- 4.4 How to Link Credit Risk Parameters and Macroeconomic Variables
- 4.5 Portfolio Credit Risk Stress Testing
- 4.6 Summary
- Suggestions for Further Reading
- Appendix A: Default Probability Estimation via Logit Regression
- Appendix B: The Forward Search for Elliptical Copulas
- Exercises
- Chapter 5: Balance Sheet, and Profit and Loss Stress Testing Projections
- Abstract
- 5.1 Introduction
- 5.2 Balance Sheet Projection
- 5.3 Profit and Loss Projection
- 5.4 Conduct and Operational Risk Stress Testing
- 5.5 Summary
- Suggestions for Further Reading
- Exercises
- Chapter 6: Regulatory Capital, RWA, Leverage, and Liquidity Requirements Under Stress
- Abstract
- 6.1 Introduction
- 6.2 Regulatory Capital
- 6.3 Risk-Weighted Assets and Capital Ratios
- 6.4 Leverage and Liquidity Ratios
- 6.5 Summary
- Suggestions for Further Reading
- Exercises
- Chapter 7: Risk Integration
- Abstract
- Key Abbreviations and Symbols
- 7.1 Introduction
- 7.2 Top-Down Risk Integration Modeling
- 7.3 Bottom-Up Economic Capital Integration Modeling
- 7.4 Bottom-Up Liquidity Integration Modeling
- 7.5 Summary
- Suggestions for Further Reading
- Exercises
- Chapter 8: Reverse Stress Testing
- Abstract
- Key Abbreviations and Symbols
- 8.1 Introduction
- 8.2 Reverse Stress Testing Objective Function
- 8.3 Integrated Risk Modeling and Vulnerability Thresholds
- 8.4 Bank-Specific Disastrous Event Fact Finding
- 8.5 Exploration of Ruinous Macroeconomic Scenarios
- 8.6 Summary
- Suggestions for Further Reading
- Exercises
- Index
Product details
- No. of pages: 316
- Language: English
- Copyright: © Academic Press 2016
- Published: November 2, 2016
- Imprint: Academic Press
- Hardcover ISBN: 9780128035900
- eBook ISBN: 9780128036112
About the Author
Tiziano Bellini
Tiziano Bellini received his PhD degree in statistics from the University of Milan after being a visiting PhD student at the London School of Economics and Political Science. He is Qualified Chartered Accountant and Registered Auditor. He gained wide risk management experience across Europe, in London, and in New York. He is currently Director at BlackRock Financial Market Advisory (FMA) in London. Previously he worked at Barclays Investment Bank, EY Financial Advisory Services in London, HSBCs headquarters, Prometeia in Bologna, and other leading Italian companies. He is a guest lecturer at Imperial College in London, and at the London School of Economics and Political Science. Formerly, he served as a lecturer at the University of Bologna and the University of Parma. Tiziano is author of Stress Testing and Risk Integration in Banks, A Statistical Framework and Practical Software Guide (in Matlab and R) edited by Academic Press. He has published in the European Journal of Operational Research, Computational Statistics and Data Analysis, and other top-reviewed journals. He has given numerous training courses, seminars, and conference presentations on statistics, risk management, and quantitative methods in Europe, Asia, and Africa.
Affiliations and Expertise
BlackRock Financial Market Advisory, London, UK
Ratings and Reviews
Latest reviews
(Total rating for all reviews)
Adriana L. Mon Jan 20 2020
Practical approach
This book is very useful because contain a very practical and statistical approach about stress testing.
EFTHYMIOSPOURNARAS Sat Apr 27 2019
A tangible insight provider on Stress-testing
The work of Mr Bellini once more satisfies the market business needs concerning the in depth specialization . The Matlab software guide provides a tangible insight on the topic.
DorinelBastide Sun Sep 23 2018
The book is self-contained, has
The book is self-contained, has technical details and is very well structure. I highly recommend in particular for anybody working on the financial Stress Testing exercises.
Giuseppe D. Wed Feb 21 2018
Stress Testing and Risk Integration in Banks
Excellent, practical and hands-on book full of specific suggestions on how to achieve optimal bank risk integration