IDEAS home Printed from https://ideas.repec.org/p/hal/cesptp/halshs-00951593.html
   My bibliography  Save this paper

Stress Testing Engineering: the real risk measurement?

Author

Listed:
  • Dominique Guegan

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Bertrand Hassani

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

Stress testing is used to determine the stability or the resilience of a given financial institution by deliberately submitting. In this paper, we focus on what may lead a bank to fail and how its resilience can be measured. Two families of triggers are analysed: the first stands in the stands in the impact of external (and / or extreme) events, the second one stands on the impacts of the choice of inadequate models for predictions or risks measurement; more precisely on models becoming inadequate with time because of not being sufficiently flexible to adapt themselves to dynamical changes.

Suggested Citation

  • Dominique Guegan & Bertrand Hassani, 2014. "Stress Testing Engineering: the real risk measurement?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00951593, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00951593
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00951593
    as

    Download full text from publisher

    File URL: https://shs.hal.science/halshs-00951593/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dominique Guegan & Bertrand Hassani & Xin Zhao, 2013. "Emerging Countries Sovereign Rating Adjustment using Market Information: Impact on Financial Institutions Investment Decisions," Post-Print halshs-00820839, HAL.
    2. Dominique Guegan & Bertrand Hassani & Xin Zhao, 2013. "Emerging Countries Sovereign Rating Adjustment using Market Information: Impact on Financial Institutions Investment Decisions," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00820839, HAL.
    3. Dominique Guegan & Pierre-André Maugis, 2010. "An Econometric Study of Vine Copulas," Documents de travail du Centre d'Economie de la Sorbonne 10040, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    4. Dominique Guegan & Pierre-André Maugis, 2008. "New prospects on vines," Documents de travail du Centre d'Economie de la Sorbonne b08095, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Mar 2010.
    5. Jeremy Berkowitz, 1999. "A coherent framework for stress-testing," Finance and Economics Discussion Series 1999-29, Board of Governors of the Federal Reserve System (U.S.).
    6. Kjersti Aas & Daniel Berg, 2009. "Models for construction of multivariate dependence - a comparison study," The European Journal of Finance, Taylor & Francis Journals, vol. 15(7-8), pages 639-659.
    7. Maria Soledad Martinez Peria & Mr. Giovanni Majnoni & Mr. Matthew T Jones & Mr. Winfrid Blaschke, 2001. "Stress Testing of Financial Systems: An Overview of Issues, Methodologies, and FSAP Experiences," IMF Working Papers 2001/088, International Monetary Fund.
    8. Dominique Guegan & Pierre-André Maugis, 2010. "New Prospects on Vines," Post-Print halshs-00348884, HAL.
    9. Rockafellar, R. Tyrrell & Uryasev, Stanislav, 2002. "Conditional value-at-risk for general loss distributions," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1443-1471, July.
    10. repec:zbw:bofrdp:2007_015 is not listed on IDEAS
    11. Dominique Guegan & Bertrand Hassani & Cédric Naud, 2011. "An efficient threshold choice for operational risk capital computation," Post-Print halshs-00790217, HAL.
    12. Bertrand Hassani & Alexis Renaudin, 2013. "The Cascade Bayesian Approach for a controlled integration of internal data, external data and scenarios," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00795046, HAL.
    13. Quagliariello,Mario (ed.), 2009. "Stress-testing the Banking System," Cambridge Books, Cambridge University Press, number 9780521767309, October.
    14. Bertrand Hassani & Alexis Renaudin, 2013. "The Cascade Bayesian Approach for a controlled integration of internal data, external data and scenarios," Post-Print halshs-00795046, HAL.
    15. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    16. Acerbi, Carlo & Tasche, Dirk, 2002. "On the coherence of expected shortfall," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1487-1503, July.
    17. Rodriguez, Juan Carlos, 2007. "Measuring financial contagion: A Copula approach," Journal of Empirical Finance, Elsevier, vol. 14(3), pages 401-423, June.
    18. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    19. Koehler, K. J. & Symanowski, J. T., 1995. "Constructing Multivariate Distributions with Specific Marginal Distributions," Journal of Multivariate Analysis, Elsevier, vol. 55(2), pages 261-282, November.
    20. repec:mse:cesdoc:13009 is not listed on IDEAS
    21. Dominique Guegan & Pierre-André Maugis, 2011. "An econometric Study for Vine Copulas," Post-Print halshs-00645799, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bertrand K. Hassani, 2014. "Risk Appetite in Practice: Vulgaris Mathematica," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01020293, HAL.
    2. Bertrand K. Hassani, 2014. "Risk Appetite in Practice: Vulgaris Mathematica," Post-Print halshs-01020293, HAL.
    3. Bertrand K Hassani, 2014. "Risk Appetite in Practice: Vulgaris Mathematica," Documents de travail du Centre d'Economie de la Sorbonne 14037, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    4. Giuseppe Montesi & Giovanni Papiro, 2018. "Bank Stress Testing: A Stochastic Simulation Framework to Assess Banks’ Financial Fragility †," Risks, MDPI, vol. 6(3), pages 1-54, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dominique Guegan & Bertrand Hassani, 2014. "Stress Testing Engineering: the real risk measurement?," Post-Print halshs-00951593, HAL.
    2. Bertrand K. Hassani, 2014. "Risk Appetite in Practice: Vulgaris Mathematica," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01020293, HAL.
    3. Bertrand K Hassani, 2014. "Risk Appetite in Practice: Vulgaris Mathematica," Documents de travail du Centre d'Economie de la Sorbonne 14037, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    4. Bertrand K. Hassani, 2014. "Risk Appetite in Practice: Vulgaris Mathematica," Post-Print halshs-01020293, HAL.
    5. Dominique Guegan & Bertrand Hassani, 2012. "Multivariate VaRs for Operational Risk Capital Computation: a Vine Structure Approach," Post-Print halshs-00587706, HAL.
    6. repec:hal:journl:halshs-01163837 is not listed on IDEAS
    7. Bertrand K. Hassani, 2015. "Model Risk – From Epistemology to Management. Ipse se nihil scire id unum sciat. (Socrates' Plato)," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01163837, HAL.
    8. Dominique Guegan & Bertrand Hassani, 2011. "Multivariate VaRs for Operational Risk Capital Computation: a Vine Structure Approach," Documents de travail du Centre d'Economie de la Sorbonne 11017rr, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Apr 2012.
    9. Bertrand K Hassani, 2015. "Model Risk - From Epistemology to Management. Ipse se nihil scire id unum sciat. (Socrates' Plato)," Documents de travail du Centre d'Economie de la Sorbonne 15026, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    10. Dominique Guegan & Bertrand Hassani, 2015. "Risk or Regulatory Capital? Bringing distributions back in the foreground," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01169268, HAL.
    11. Dominique Guegan & Bertrand K Hassani, 2015. "Risk or Regulatory Capital? Bringing distributions back in the foreground," Documents de travail du Centre d'Economie de la Sorbonne 15046, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    12. Dominique Gu�gan & Bertrand Hassani, 2015. "Risk or Regulatory Capital? Bringing distributions back in the foreground," Working Papers 2015:18, Department of Economics, University of Venice "Ca' Foscari".
    13. Dominique Guegan & Bertrand Hassani, 2015. "Risk or Regulatory Capital? Bringing distributions back in the foreground," Post-Print halshs-01169268, HAL.
    14. Koliai, Lyes, 2016. "Extreme risk modeling: An EVT–pair-copulas approach for financial stress tests," Journal of Banking & Finance, Elsevier, vol. 70(C), pages 1-22.
    15. Ruili Sun & Tiefeng Ma & Shuangzhe Liu & Milind Sathye, 2019. "Improved Covariance Matrix Estimation for Portfolio Risk Measurement: A Review," JRFM, MDPI, vol. 12(1), pages 1-34, March.
    16. Al Janabi, Mazin A.M. & Arreola Hernandez, Jose & Berger, Theo & Nguyen, Duc Khuong, 2017. "Multivariate dependence and portfolio optimization algorithms under illiquid market scenarios," European Journal of Operational Research, Elsevier, vol. 259(3), pages 1121-1131.
    17. Del Brio, Esther B. & Mora-Valencia, Andrés & Perote, Javier, 2020. "Risk quantification for commodity ETFs: Backtesting value-at-risk and expected shortfall," International Review of Financial Analysis, Elsevier, vol. 70(C).
    18. Weiß, Gregor N.F., 2011. "Are Copula-GoF-tests of any practical use? Empirical evidence for stocks, commodities and FX futures," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(2), pages 173-188, May.
    19. H. Fink & S. Geissel & J. Sass & F. T. Seifried, 2019. "Implied risk aversion: an alternative rating system for retail structured products," Review of Derivatives Research, Springer, vol. 22(3), pages 357-387, October.
    20. Christina Erlwein & Gautam Mitra & Diana Roman, 2012. "HMM based scenario generation for an investment optimisation problem," Annals of Operations Research, Springer, vol. 193(1), pages 173-192, March.
    21. Stavros Stavroyiannis, 2016. "Value-at-Risk and backtesting with the APARCH model and the standardized Pearson type IV distribution," Papers 1602.05749, arXiv.org.

    More about this item

    Keywords

    risk; Stress test; risques; VaR;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:halshs-00951593. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.