For a given set of banks, which economic and financial scenarios will lead to big losses? How big can losses in such scenarios possibly get? These are the two central questions of macro stress tests. We believe that most current macro stress testing models have deficits in answering these...

We present a simple and operational yet rigorous framework that combines current methods of bank solvency stress tests with a description of fire sales. We demonstrate the applicability of our framework to the EBA stress testing exercise. Fire sales are described by an equilibrium model which...

We propose a new method for analysing multiperiod stress scenarios for portfolio credit risk more systematically than in the current practice of macro stress testing. Our method quantifies the plausibility of scenarios by considering the distance of the stress scenario from an average scenario....

In 2002 the Oesterreichische Nationalbank (OeNB) launched in parallel several projects to develop modern tools for systemic financial stability analysis, off-site banking supervision and supervisory data analysis. In these projects the OeNB’s expertise in financial analysis and research was...

We propose a new method for the analysis of systemic stability of a banking system relying mostly on market data. We model both asset correlations and interlinkages from interbank borrowing so that our analysis gauges two major sources of systemic risk: correlated exposures and mutual credit...