Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Constructing stress tests

Constructing stress tests Purpose – There is limited discussion in the literature of the problems associated with constructing stress tests. The Credit Crunch has revealed that attention simply to haircuts to asset values and resulting margin calls is insufficient. The purpose of this paper is to explore additional avenues for stress testing. Design/methodology/approach – The paper is largely discursive. Findings – Stress tests must look into the debt position of the firm, as well as its position and credit exposures. Not only the volume of debt but its maturity structure, callability and the indentures attached to it are extremely important. Research limitations/implications – The paper is geared more toward management and practitioners than to academic researchers. Implications for the analysis of corporate strategy are significant. Social implications – Stress testing is essential to the confident continuance of firms. Originality/value – So much of the work in this area is proprietary and so little has been published on it. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Risk Finance Emerald Publishing

Constructing stress tests

John B. Abbink
The Journal of Risk Finance , Volume 12 (5): 14 – Nov 8, 2011
Download PDF
14 pages

Loading next page...
 
/lp/emerald-publishing/constructing-stress-tests-0Ay5i5cbIS
Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1526-5943
DOI
10.1108/15265941111176154
Publisher site
See Article on Publisher Site

Abstract

Purpose – There is limited discussion in the literature of the problems associated with constructing stress tests. The Credit Crunch has revealed that attention simply to haircuts to asset values and resulting margin calls is insufficient. The purpose of this paper is to explore additional avenues for stress testing. Design/methodology/approach – The paper is largely discursive. Findings – Stress tests must look into the debt position of the firm, as well as its position and credit exposures. Not only the volume of debt but its maturity structure, callability and the indentures attached to it are extremely important. Research limitations/implications – The paper is geared more toward management and practitioners than to academic researchers. Implications for the analysis of corporate strategy are significant. Social implications – Stress testing is essential to the confident continuance of firms. Originality/value – So much of the work in this area is proprietary and so little has been published on it.

Journal

The Journal of Risk Finance – Emerald Publishing

Published: Nov 8, 2011

Keywords: Value analysis; Financial performance; Corporate finances; Stress test; Value at risk

References

  • International Convergence of Capital Measurement and Capital Standards: A Revised Framework
    Basel Committee on Banking Supervision
  • A framework for understanding market crisis
    Bookstaber, R.M.
  • Hedging a flow of commodity deliveries with futures: lessons from Metallgesellschaft
    Culp, C.; Miller, M.
  • Operational risk
    Jarrow, R.A.
  • Liquidity risk and risk measure computation
    Jarrow, R.A.; Protter, P.
  • The City of London: Volume I: A World of Its Own
    Kynaston, D.
  • Risk Management: A Review
    Lleo, S.
  • Hedge Funds: An Analytic Perspective
    Lo, A.W.