Stress Tests & Scenarios
Historical, hypothetical and reverse stress tests, CCAR/EBA frameworks, scenario design and how regulators force banks to model the worst.
advanced · 4h 30 · 29 lessons
Course content
Introduction to Stress Testing
Understand the fundamental concept of stress testing in finance and its importance.
Why Stress Testing is Crucial for Financial Stability
Explore the critical role of stress testing in safeguarding individual institutions and the broader financial system.
Types of Stress Tests: Historical, Hypothetical, and Reverse
Differentiate between the main categories of stress tests and their applications.
Macroeconomic Scenario Design for Stress Tests
Learn how to construct rigorous and relevant macroeconomic scenarios for effective stress testing.
Scenario Severity and Plausibility
Balance the need for severe scenarios with the requirement for plausibility.
CCAR Framework: Introduction to US Bank Stress Testing
Understand the Comprehensive Capital Analysis and Review (CCAR) framework for US banks.
EBA Framework: Introduction to EU Bank Stress Testing
Understand the European Banking Authority (EBA) stress testing framework.
Stress Testing Governance and Reporting
Understand the critical importance of robust governance and clear reporting in stress testing.
Modeling Credit Risk in Stress Tests
Understand how credit risk is modeled and projected under adverse scenarios.
Modeling Market Risk in Stress Tests
Understand how market risk is assessed under adverse market movements in stress tests.
Operational Risk in Stress Tests
Examine how operational risk is incorporated into stress testing frameworks.
Modeling Liquidity Risk in Stress Tests
Explore how liquidity risk is assessed under various stress scenarios.
Model Risk and Validation in Stress Testing
Understand model risk inherent in stress testing and the importance of robust model validation.
Data Quality and Infrastructure for Stress Testing
Understand the critical role of high-quality data and robust infrastructure in stress testing.
Integrated Risk Management and Stress Testing
Understand how stress testing supports an integrated view of risk across an organization.
Capital Planning and Stress Testing
Examine the vital link between stress testing outcomes and an institution's capital planning process.
Leveraging Stress Test Results for Strategic Decision Making
Discover how stress test insights can inform and guide strategic business decisions beyond compliance.
Reverse Stress Testing: A Deep Dive
Explore the methodology and benefits of reverse stress testing in detail.
Scenario Expansion and Transmission Mechanisms
Explore how initial shocks propagate through the economy and financial system in stress scenarios.
Recovery and Resolution Planning (RRP) and Stress Testing
Understand the link between stress testing and a firm's recovery and resolution plans.
Systemic Stress Testing: Beyond Individual Firms
Understand how stress tests are applied to the entire financial system to identify systemic risks.
Contingent Capital and CoCo Bonds in Stress Events
Examine the role of contingent capital instruments, particularly CoCo bonds, in enhancing resilience during stress.
Shadow Banking and Stress Testing
Explore the challenges and efforts to stress test the shadow banking sector.
Climate Risk Stress Tests
Understand the emerging field of climate-related financial risk stress testing for financial institutions.
FinTech and Digital Risk Stress Testing
Examine how stress testing is adapting to address risks introduced by FinTech innovations and digital transformation.
Behavioral Aspects in Stress Testing
Examine how behavioral finance and psychological biases impact stress test design and outcomes.
Global Coordination in Stress Testing
Examine the initiatives and challenges in coordinating stress tests across borders and jurisdictions.
The Future of Stress Testing
Explore emerging trends, technologies, and challenges shaping the future of financial stress testing.
Best Practices and Lessons Learned in Stress Testing
Consolidate key best practices and lessons learned from years of stress test experience.