The impact of a stress scenario of default events on the loss distribution of a credit portfolio can be assessed by determining the loss distribution conditional on these events. While it is conceptually easy to estimate loss distributions conditional on default events by means of Monte Carlo...

The recent evolution of prudential regulation establishes a new requirement for banks and supervisors to perform reverse stress test exercises in their risk assessment processes, aimed at detecting default or near-default scenarios. We propose a reverse stress test methodology based on a...

Systemic risk, in a complex system with several interrelated variables, such as a financial market, is quantifiable from the multivariate probability distribution describing the reciprocal influence between the system's variables. The effect of stress on the system is reflected by the change in...

Financial risk measurement is a challenging task because both the types of risk and their measurement techniques evolve quickly. This book collects a number of novel contributions for the measurement of financial risk, which addresses partially explored risks or risk takers in a wide variety of...