Risk has designed a two day course in order to offer attendees practical guidance on how to implement the three ratios, focusing on the U. LCR, NSFR and Leverage Ratio implications and calculations.With the convergence of Governance, Risk and Compliance (GRC) functions, the boundaries and scope of ORM are continuously expanding.Journal of Finance 62 (1), 93-117  De Servigny, A., Renault, O. Federal Reserve Board Working paper, January 2002  Merton, R. On the pricing of corporate debt: the risk structure of interest rates. The Journal of Risk Model validation, Volume 3 (3), Fall 2009  Miu, P., Ozdemir, B. Estimating and validating long-run probability of default with respect to Basel II requirements. Journal of Economic Dynamics & Control, 33 (2009), 37-52  Vasicek, O.
Portfolio default risk and credit loss under stress scenarios are derived accordingly. 60-92  Friedman, J., Hastie, T., and Tibshirani, R. The Elements of Statistical Learning, 2nd edition, Springer  Gordy, M. Journal of Financial Intermediation 12, pp.199-232. (2011) Firm Default and Aggregate Fluctuations, Board of Governors of the Federal Reserve System, August 2011  Merton, R. On the pricing of corporate debt: the risk structure of interest rates. The Journal of Risk Model validation, Volume 3 (3), Fall  Miu, P., Ozdemir, B. Stress testing probability of default and rating migration rate with respect to Basel II requirements, Journal of Risk Model Validation, Vol. Econometric Models and Economic Forecasts,4th Edition, Irwin/Mc Graw-Hill  Rosen, D., Saunders, D. Analytical methods for hedging systematic credit risk with linear factor portfolios.
Results show, stress-testing models developed in this way demonstrate desired sensitivity to risk factors, which is generally expected. Principles for Sound Stress Testing Practices and Supervision  Belkin, B., Forest, L., and Suchover, S. A one-parameter representation of credit risk and transition matrices. Stress Testing of Financial Systems: An Overview of Issues, Methodologies, and FSAP Experiences, IMF Working Paper, WP/01/88  Breiman, L. Journal of Finance, Volume 29 (2), 449-470  Meyer, C. 3 (4) Winter 2009, pp.3-38  Miu, P., Ozdemir, B. Estimating and validating long-run probability of default with respect to Basel II requirements. Journal of Economic Dynamics & Control, 33 (2009), 37-52  Sorge, M. Stress-testing financial systems: an overview of current methodologies, BIS Working papers, No.
In this paper, we extend Miu and Ozdemir’s work () on stress testing under this transition probability framework by assuming different asset correlation and different stress testing factor model for each non-default rating.
We propose two Vasicek models for each non-default rating, one with a single latent factor for rating level asset correlation, and another multifactor Vasicek model with a latent effect for systematic downgrade risk.
In Japan, the range of the coefficient of restitution of official baseballs has changed frequently over the past five years, causing the the number of home runs to vary drastically.
We analyzed data from Japanese baseball games played in 2014 to investigate the statistical properties of pitched balls.
Under the Vasicek asymptotic single risk factor model, stress testing based on rating transition probability involves three components: the unconditional rating transition matrix, asset correlations, and stress testing factor models for systematic downgrade (including default) risk.
Conditional transition probability for stress testing given systematic risk factors can be derived accordingly.
Credit Metrics Monitor 1(3), 46-56  Blaschke, W., Jones , M. The Journal of Risk Model validation, Volume 2/Number 2,3-41  Pindyck, R. 165  Tarashev, N., Borio, C., and Tsatsaronis, K. Attributing systematic risk to individual institutions,” Technical Report Working Papers No 308, BIS, May 2010.
(2008) Estimating and Validating Long-Run Probability of Default with Respect to Basel II Requirements.
To validate the proposed models, we estimate the asset correlations for 13 industry sectors using corporate annual default rates from S&P for years 1981-2011, and long-run PD and asset correlation for a US commercial portfolio, using US delinquent rate for commercial and industry loans from US Federal Reserve. An Explanatory Note on the Basel II IRB Risk Weight Functions, July 2005. Machine Learning 24: 123-140  Chernih, A., Vanduffel, S., and Henald, L. Asset correlations: a literature review and analysis of the impact of dependent loss given defaults  Das, S., Duffie, D., Kapadia, N., Saita, L.  Demey, P., Jouanin, J., Roget, C, and Roncalli, T. Maximum likelihood estimate of default correlations, Risk, November 2004  Friedman, J., Hastie, T., and Tibshirani, R. The Elements of Statistical Learning, 2nd edition, Springer  Frye, J. Correlation and asset correlation in the structural portfolio model.