Shock on Variable or Shock on Distribution with Application to Stress-Tests

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type , Preprint 01 Jan 2012 English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

Copyright policy )Funded by:NSERC | unidentified

Authors: Dubecq, S.; Gourieroux, C.;

doi: 10.2139/ssrn.2080976 , 10.2139/ssrn.2016967

Shock on Variable or Shock on Distribution with Application to Stress-Tests

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Abstract

The shocks on a stochastic system can be defined by means of either distribution, or variable. We relate these approaches and provide the link between the global and local effects of both types of shocks. These methodologies are used to perform stress-tests on the portfolio of financial institutions by means of shocks on systematic factors, for which we distinguish the cases of crystallized and optimally updated portfolios. The approach is illustrated by an analysis of the risk of sovereign bonds of the Eurozone.

Related Organizations

Center for Interuniversity Research and Analysis on Organizations
Canada
University of Toronto
Canada
National Bureau of Economic Research
United States
École Nationale de la Statistique et de l'Administration Économique
France

Keywords

Shock, Copula, Extreme Risk, Stress-Test, Factor Model, Systemic Risk, Portfolio Management, Sovereign Bonds, Shock, Copula, Extreme Risk, Stress-Test, Factor Model, Systemic Risk, Portfolio Management, Sovereign Bonds., jel: jel:G17, jel: jel:C10, jel: jel:E37, jel: jel:G11

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