We propose a new stress testing method to model coefficient uncertainty in addition to
macroeconomic stress. Based on US mortgage loan data, we model the probability of …

This paper deals with stress tests for credit risk and shows how exploiting the discretion
when setting up and implementing a model can drive the results of a quantitative stress test …

The use of stress testing for risk monitoring has increased considerably over the last decade.
Stress testing–a simulation technique used to assess the strength of a portfolio or a financial …

In this paper we study the impact of model uncertainty, which occurs when linking a stress
scenario to default probabilities, on reduced-form credit risk stress testing. This type of …

Following the recent global financial crisis, regulators have recognized the importance of
stress testing, in part due to the impact of model risk, and have implemented supervisory …

We aim to raise the awareness that model uncertainty stemming from stress test satellite
equations that relate bank risk parameters to macro-financial variables can be significant …

Financial institutions are faced with the challenge to forecast future credit portfolio losses. It
is common practice to focus on portfolio models consisting of a limited set of parameters …

Credit risk is the potential exposure of a creditor to an obligor's failure or refusal to repay the
debt in principal or interest. The potential of exposure is measured in terms of probability of …

This study aims to evaluate the techniques used for the validation of default probability (DP)
models. By generating simulated stress data, we build ideal conditions to assess the …

We present an empirical study of stress testing for portfolios of auto loans. We find that loans
aged five years or more have significantly higher default probabilities. This finding raises …