Guarda, Paolo; Rouabah, Abdelaziz; Theal, John - Central Bank of Luxembourg - 2011
The stress testing literature abounds with reduced-form macroeconomic models that are used to forecast the evolution of … the macroeconomic environment in the context of a stress testing exercise. These models permit supervisors to estimate … observed frequency of distant tail events that represent the hallmark of systemic financial stress. Consequently, these kinds …