The aim of this study is to conduct macro stress test of credit risk for the Turkish Banking Industry based on scenario analysis. In this study vector auto regression model is used to determine the interrelations between the macroeconomic variables and develop consistent scenarios spread to two...

In the wake of Basel II, stress tests are recommended by most central banks, for their supervisory review process. However, most of these tests fail to consider the probability of occurrence of the shocks. Using data on USD-INR and GBP-INR between January 2000 and February 2001, we couch stress...

Gradient capital allocation, also known as Euler allocation, is a technique used to redistribute diversified capital requirements among different segments of a portfolio. The method is commonly employed to identify dominant risks, assessing the risk-adjusted profitability of segments, and...

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Various stakeholders are increasingly encouraging companies from the real economy to adopt measures facilitating their transition towards carbon neutrality. In this context, companies are expected to implement forward-looking strategies and climate-related reporting practices using scenario...

Climate change has become a pressing issue that requires comprehensive and scientific understanding of its impact on the economy. Policymakers seek answers to the questions of how climate change affects economic growth, inflation, and the financial system. To design targeted policies, it is...

In response to a growing awareness of the potential impact of climate change on financial stability, academics, financial institutions (FIs), central banks and supervisors (CB&S) have developed a suite of scenarios and analytical tools to assess forward-looking climate-related financial risks,...

Valuation always has to deal with uncertainty. The paper provides an overview and illustration of how Monte Carlo simulation can enrich the due diligence process. Therefore ; the four major software offerings on the market today are reviewed. The investigation addresses different characteristics...

The combination of experts' probability distributions involved in a due diligence is valuable for encapsulating the accumulated information for decision makers and providing the current state of expert opinion regarding important uncertainties. Therefore, this paper shows how to create and...

The paper develops a comprehensive framework for market risk stress testing in internationally active financial institutions. We begin by defining the scope and type of the stress test and explaining how to select risk factors and the stress time horizon. We then address challenges related to...