A two-day comprehensive course on stress testing of market, credit and liquidity risks for regulatory and internal capital allocation purposes
The purpose of this seminar is to give you a good understanding of stress testing methodologies and tools and of their practical use in risk management.
We start with and overview of the revised regulatory requirements and recommendations stress testing.
We then present an overall framework for stress testing and give a thorough explanation of how different types of stress testing are applied to credit, market, operational and liquidity risk.
Methodologies include simple sensitivity tests and more complex tests which aim to assess the impact of a severe macroeconomic stress event on measures like earnings and economic capital.
We explain how to use scenario analysis to quantify the potential impact of historical extreme events, stylized scenarios such as the break-down of correlation assumptions and hypothetical one-off events.
We also explain how to use "mechanical" approaches such as factor push analysis and maximum loss optimization. In each case, we give practical examples and we discuss the practical implementation challenges.
Finally, we discuss how integrated stress is used to account for correlations between different risks types and how the results of stress testing are fed into internal capital and liquidity planning.
