This paper deals with stress tests for credit risk and shows how exploiting the discretion when setting up and … probabilities are less exposed to model and estimation risk. In addition, the risk horizon over which the stress default … extensive robustness checks for model-based credit risk stress tests. …

This paper presents a new method to validate risk models: the Risk Map. This method jointly accounts for the number and … the magnitude of extreme losses and graphically summarizes all information about the performance of a risk model. It … relies on the concept of a super exception, which is defined as a situation in which the loss exceeds both the standard Value-at-Risk …

Addressing recent calls by European regulatory and supervisory authorities, we develop a new bottom-up climate risk … default risk of STOXX Europe 600 firms. For about 5% of the sample firms, we find asset devaluation shocks larger than 30% and … stress test on credit risk based on these results, we find a decrease in capital ratios between $$-1.2$$and $$-1 …

probabilities, on reduced-form credit risk stress testing. This type of uncertainty is omnipresent in most macroeconomic stress … testing applications due to short time series for banks' portfolio risk parameters and highly collinear macroeconomic … distributions and implied capital shortfalls by conducting a full-edged top-down credit risk stress test for over 1,500 German banks …

This paper evaluates the model risk of models used for forecasting systemic and market risk. Model risk, which is the … periods, the underlying risk forecast models produce similar risk readings; hence, model risk is typically negligible. However … the reliability of risk readings. Finally, particular conclusions on the underlying reasons for the high model risk and …

The regulatory use of banks' internal models makes capital requirements more risk-sensitive but invites regulatory … arbitrage. I develop a framework to study bank regulation with strategic selection of risk models. A bank supervisor can … discourage arbitrage by auditing risk models, and implements capital ratios less risk-sensitive than in the first-best to reduce …