Methods and Models of Market Risk Stress-Testing of the Portfolio of Financial Instruments
Amid instability of financial markets and macroeconomic situation the necessity of improving bank risk-management instrument arises. New economic reality defines the need for searching for more advanced approaches of estimating banks vulnerability to exceptional, but plausible events. Stress-testing...
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| Format: | Article |
| Language: | English |
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MGIMO University Press
2015-08-01
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| Series: | Vestnik MGIMO-Universiteta |
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| Online Access: | https://www.vestnik.mgimo.ru/jour/article/view/401 |
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| author | A. M. Karminsky E. V. Seryakova |
| author_facet | A. M. Karminsky E. V. Seryakova |
| author_sort | A. M. Karminsky |
| collection | DOAJ |
| description | Amid instability of financial markets and macroeconomic situation the necessity of improving bank risk-management instrument arises. New economic reality defines the need for searching for more advanced approaches of estimating banks vulnerability to exceptional, but plausible events. Stress-testing belongs to such instruments. The paper reviews and compares the models of market risk stress-testing of the portfolio of different financial instruments. These days the topic of the paper is highly acute due to the fact that now stress-testing is becoming an integral part of anticrisis risk-management amid macroeconomic instability and appearance of new risks together with close interest to the problem of risk-aggregation. The paper outlines the notion of stress-testing and gives coverage of goals, functions of stress-tests and main criteria for market risk stress-testing classification. The paper also stresses special aspects of scenario analysis. Novelty of the research is explained by elaborating the programme of aggregated complex multifactor stress-testing of the portfolio risk based on scenario analysis. The paper highlights modern Russian and foreign models of stress-testing both on solo-basis and complex. The paper lays emphasis on the results of stress-testing and revaluations of positions for all three complex models: methodology of the Central Bank of stress-testing portfolio risk, model relying on correlations analysis and copula model. The models of stress-testing on solo-basis are different for each financial instrument. Parametric StressVaR model is applicable to shares and options stress-testing;model based on "Grek" indicators is used for options; for euroobligation regional factor model is used. Finally some theoretical recommendations about managing market risk of the portfolio are given. |
| format | Article |
| id | doaj-art-561cee721011401faab0dad0d102a743 |
| institution | Kabale University |
| issn | 2071-8160 2541-9099 |
| language | English |
| publishDate | 2015-08-01 |
| publisher | MGIMO University Press |
| record_format | Article |
| series | Vestnik MGIMO-Universiteta |
| spelling | doaj-art-561cee721011401faab0dad0d102a7432025-01-30T12:16:13ZengMGIMO University PressVestnik MGIMO-Universiteta2071-81602541-90992015-08-0104(43)536310.24833/2071-8160-2015-4-43-53-63401Methods and Models of Market Risk Stress-Testing of the Portfolio of Financial InstrumentsA. M. Karminsky0E. V. Seryakova1Moscow State Institute of International Relations (University)Moscow State Institute of International Relations (University)Amid instability of financial markets and macroeconomic situation the necessity of improving bank risk-management instrument arises. New economic reality defines the need for searching for more advanced approaches of estimating banks vulnerability to exceptional, but plausible events. Stress-testing belongs to such instruments. The paper reviews and compares the models of market risk stress-testing of the portfolio of different financial instruments. These days the topic of the paper is highly acute due to the fact that now stress-testing is becoming an integral part of anticrisis risk-management amid macroeconomic instability and appearance of new risks together with close interest to the problem of risk-aggregation. The paper outlines the notion of stress-testing and gives coverage of goals, functions of stress-tests and main criteria for market risk stress-testing classification. The paper also stresses special aspects of scenario analysis. Novelty of the research is explained by elaborating the programme of aggregated complex multifactor stress-testing of the portfolio risk based on scenario analysis. The paper highlights modern Russian and foreign models of stress-testing both on solo-basis and complex. The paper lays emphasis on the results of stress-testing and revaluations of positions for all three complex models: methodology of the Central Bank of stress-testing portfolio risk, model relying on correlations analysis and copula model. The models of stress-testing on solo-basis are different for each financial instrument. Parametric StressVaR model is applicable to shares and options stress-testing;model based on "Grek" indicators is used for options; for euroobligation regional factor model is used. Finally some theoretical recommendations about managing market risk of the portfolio are given.https://www.vestnik.mgimo.ru/jour/article/view/401market riskportfolio riskrisk-managementstress-testingstress-testing modelsbankscopulasvalue-at-risk |
| spellingShingle | A. M. Karminsky E. V. Seryakova Methods and Models of Market Risk Stress-Testing of the Portfolio of Financial Instruments Vestnik MGIMO-Universiteta market risk portfolio risk risk-management stress-testing stress-testing models banks copulas value-at-risk |
| title | Methods and Models of Market Risk Stress-Testing of the Portfolio of Financial Instruments |
| title_full | Methods and Models of Market Risk Stress-Testing of the Portfolio of Financial Instruments |
| title_fullStr | Methods and Models of Market Risk Stress-Testing of the Portfolio of Financial Instruments |
| title_full_unstemmed | Methods and Models of Market Risk Stress-Testing of the Portfolio of Financial Instruments |
| title_short | Methods and Models of Market Risk Stress-Testing of the Portfolio of Financial Instruments |
| title_sort | methods and models of market risk stress testing of the portfolio of financial instruments |
| topic | market risk portfolio risk risk-management stress-testing stress-testing models banks copulas value-at-risk |
| url | https://www.vestnik.mgimo.ru/jour/article/view/401 |
| work_keys_str_mv | AT amkarminsky methodsandmodelsofmarketriskstresstestingoftheportfoliooffinancialinstruments AT evseryakova methodsandmodelsofmarketriskstresstestingoftheportfoliooffinancialinstruments |