Developing Credit Risk Models Using SAS Enterprise Miner and SAS/STAT

Chapter 6 Stress Testing

6.1 Overview of Stress Testing

6.2 Purpose of Stress Testing

6.3 Stress Testing Methods

6.3.1 Sensitivity Testing

6.3.2 Scenario Testing

6.4 Regulatory Stress Testing

6.5 Chapter Summary

6.6 References and Further Reading

6.1 Overview of Stress Testing

In previous sections, we have detailed how analysts can develop and model each of the different risk parameters that are required under the advanced internal ratings-based (A-IRB) approach. However, this is only part of the journey, as before models can be set free into the wild they must be stress tested over a number of different extrinsic scenarios that can have an impact on them. The topic of stress testing, as defined by the Committee on the Global Financial System ...