This paper proposes a model to conduct macro stress test of credit risk for the banking system based on scenario analysis. We employ an original bank-level data set that splits bank credit portfolios in 21 granular categories, encompassing household and corporate loans. The results corroborate...

The banking crises of the 1990s emphasize the need to model the connections between volatility and the potential losses faced by financial institutions due to correlated market and credit risks. We present a simulation model that explicitly links changes in the financial environment and the...

Using monthly data for a set of variables, we examine the out-of-sample performance of various variance/covariance models and find that no model has consistently outperformed the others. We also show that it is possible to increase the probability mass toward the tails and to match reasonably...