We enhance the method of integrating scenarios proposed in Ergashev (2012) into risk models. In particular, we provide additional theoretical insights of the method with focus on stress testing Value-at-Risk models. We extend the application of the method, which is originally proposed for...

Using supervisory data from large U.S. bank holding companies (BHCs), we document that BHCs suffer more operational losses during episodes of extreme storms. Among different operational loss types, losses due to external fraud, BHCs' failure to meet obligations to clients and faulty business...