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A Framework for Stress Testing Banks’ Credit Risk

  • Jim Wong
  • Ka-Fai Choi
  • Tom Pak-Wing Fong
Part of the Palgrave Macmillan Studies in Banking and Financial Institutions book series (SBFI)

Abstract

Macro stress testing refers to a range of techniques used to assess the vulnerability of a financial system to ‘exceptional but plausible’ macroeconomic shocks.2 Increasingly, macro stress testing plays an important role in the macro-prudential analysis of public authorities. The main objective is to identify structural vulnerability and overall risk exposures in a financial system that could lead to systemic problems. In conjunction with stress testing to assess the vulnerability of the portfolios of individual institutions, macro stress testing forms the main part of system-wide analysis, which measures the risk exposure of a group of financial institutions to a specific stress scenario. It can also serve as a tool for cross-checking results obtained by financial institutions’ internal models.

Keywords

Credit Risk Banking Sector Real Interest Rate Macroeconomic Variable Default Rate 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Jim Wong, Ka-Fai Choi and Tom Pak-Wing Fong 2008

Authors and Affiliations

  • Jim Wong
  • Ka-Fai Choi
  • Tom Pak-Wing Fong

There are no affiliations available

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