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Integrating solvency and liquidity stress tests : the use of Markov regime-switching models

Han, Fei; Leika, Mindaugas - 2019

The paper presents a framework to integrate liquidity and solvency stress tests. An empirical study based on European … bond trading data finds that asset sales haircuts depend on the total amount of assets sold and general liquidity … conditions in the market. To account for variations in market liquidity, the study uses Markov regime-switching models and links …

Persistent link: https://www.econbiz.de/10012154762

Liquidity at risk : joint stress testing of solvency and liquidity

Cont, Rama; Kotlicki, Artur; Valderrama, Laura - 2020

. Liquidity stress tests have been applied in parallel to and independently from solvency stress tests, based on scenarios which … testing of solvency and liquidity: our approach exploits the mechanisms underlying the solvency-liquidity nexus to derive … relations between solvency shocks and liquidity shocks. These relations are then used to model liquidity and solvency risk in a …

Persistent link: https://www.econbiz.de/10012251907

CoMap : mapping contagion in the euro area banking sector

Covi, Giovanni; Gorpe, Mehmet Ziya; Kok Sørensen, … - 2019

This paper presents a novel approach to investigate and model the network of euro area banks' large exposures within the global banking system. Drawing on a unique dataset, the paper documents the degree of interconnectedness and systemic risk of the euro area banking system based on bilateral...

Persistent link: https://www.econbiz.de/10012102210

Macroprudential stress tests : a reduced-form approach to quantifying systemic risk losses

Alla, Zineddine; Espinoza, Raphael A.; Li, Qiaoluan H.; … - 2018

We present a novel approach that incorporates individual entity stress testing and losses from systemic risk effects (SE losses) into macroprudential stress testing. SE losses are measured using a reduced-form model to value financial entity assets, conditional on macroeconomic stress and the...

Persistent link: https://www.econbiz.de/10011932566

Market-Based Structural Top-Down Stress Tests of the Banking System

Chan-Lau, Jorge A. - 2013

Despite increased need for top-down stress tests of financial institutions, performing them is challenging owing to the absence of granular information on banks’ trading and loan portfolios. To deal with these data shortcomings, this paper presents a market-based structural top-down stress...

Persistent link: https://www.econbiz.de/10014395258

Stress testing and calibration of macroprudential policy tools

Górnicka, Lucyna; Valderrama, Laura - 2020

We present a semi-structural model of default risk, which is a function of loan and borrower characteristics, economic conditions, and the regulatory environment. We use this model to simulate bank credit losses for stress-testing purposes and to calibrate borrower-based macroprudential tools....

Persistent link: https://www.econbiz.de/10012301885

Stress testing U.S. leveraged corporates in a COVID-19 world

Caceres, Carlos; Cerdeiro, Diego A.; Pan, Dan; Suchanan … - 2020

and liquidity needs facing the U.S. corporate sector based on projections of net income, availability and cost of funding … segment and the relatively long duration of that sector's debt, the near-term liquidity needs of these corporates appear …

Persistent link: https://www.econbiz.de/10012392538

Bank solvency and funding cost : new data and new results

Schmitz, Stefan W.; Sigmund, Michael; Valderrama, Laura - 2017

a simultaneous equation approach to estimate the contemporaneous interaction between solvency and liquidity. Our results … show that liquidity and solvency interactions can be more material than suggested by the existing empirical literature. A … testing. Our analysis suggests that neglecting the dynamic features of the solvency-liquidity nexus in the 2014 EU-wide stress …

Persistent link: https://www.econbiz.de/10011704519

Sever, Can; Perez-Archila, Manuel - 2021

This paper builds a framework to quantify the financial stability implications of climate-related transition risk in Colombia. We explore risks imposed on the banking system based on scenarios of an increase in the domestic carbon tax by using bank- and firm-level data. Focusing on the...

Persistent link: https://www.econbiz.de/10012796249

Competition vs. stability : oligopolistic banking system with run risk

Capelle, Damien - 2021

This paper develops a model where large financial intermediaries subject to systemic runs internalize the effect of their leverage on aggregate risk, returns and asset prices. Near the steady-state, they restrict leverage to avoid the risk of a run which gives rise to an accelerator effect. For...

Persistent link: https://www.econbiz.de/10012604798