We propose a new method for analysing multi-period stress scenarios for portfolio credit risk more systematically than in the current practice of macro stress testing. Our method quantifies the plausibility of scenarios by considering the distance of the stress scenario from an average scenario....

Maximum Loss over admissibility domains with a specified probability mass shows a peculiar kind of dimensional dependence: for a fixed portfolio and fixed probability of the admissibility domain, the inclusion of additional irrelevant risk factors increases Maximum Loss. For elliptical...