Banking regulations set minimum levels of capital for banks. These requirements are generally formulated through a ratio of capital to risk-weighted assets. A risk-weighting scheme assigns a weight to each asset or category of assets and effectively functions as a linear constraint on a bank's...

This paper develops methods for selecting and analyzing stress scenarios for financial risk assessment, with particular emphasis on identifying sensible combinations of stresses to multiple variables. We begin by focusing on reverse stress testing — finding the most likely scenarios leading to...

This paper develops a method for selecting and analysing stress scenarios for financial risk assessment, with particular emphasis on identifying sensible combinations of stresses to multiple factors. We focus primarily on reverse stress testing - finding the most likely scenarios leading to...