Wednesday, February 21, 2018 - 16:00 GMT/11:00 EST
Reverse stress tests identify scenarios that have a specified negative impact on a portfolio or a company. They have been strongly endorsed by regulators since they allow banks to identify economic scenarios that threaten their survival. Reverse stress tests can also be used to identify systemic risk. Moreover, asset managers and hedge funds need to identify plausible tail events that can adversely impact their portfolios.
Although reverse stress tests are attractive from a risk perspective, how do we go about implementing a reverse stress testing programme that is independent of a manager’s bias? Under traditional stress tests, managers select stress factor shocks. But have the magnitudes of these factor shocks been impartially selected and how plausible are they?
In this webinar, Robert Stamicar, Strategic Innovation, will discuss a systematic and quantitative approach that helps to eliminate manager bias. All reverse stress testing frameworks require plausibility measures and enhanced grid pricing of scenarios around the specified portfolio loss. He will explore the structural dependence between risk factors through Vine copulas to capture tail risk. In addition, he will outline a quasi-Monte Carlo simulation approach and plausibility measures for non-elliptic distributions.
Register for the webinar here.