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....

Stress tests that do not consider systemic risk may be focused only on the initial risk of insolvency due to loan losses and not on the consequent risk of illiquidity that arise from deleveraging. We examine bank failures to find a larger number of banks failing in a larger number of scenarios...

This Analysis presents in plain language the main features of the Asset Quality Review and the EU-wide stress test 2014 and discusses some key issues in the interpretation of the forthcoming 2014 stress test results. It comments on selected policy issues in the implementation of the asset...

This Analysis presents in plain language the main features of the Asset Quality Review and the EU-wide stress test 2014 and discusses some key issues in the interpretation of the forthcoming 2014 stress test results. It comments on selected policy issues in the implementation of the asset...