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Questions tagged [stress-testing]

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4
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1answer
47 views

Stress Testing approaches at Pension Funds/Asset Management companies

I am looking for resources on Stress Testing for non-banking institution, specifically for long term oriented Asset Management companies, Hedge Funds, Pension Funds, and other Investment companies. ...
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0answers
33 views

Proof of no arb condition after shifting SABR’s rho

Does anyone know of any paper or research where they shift SABR’s skew and rebuild the surface? In particular, I would like to prove theoretically whether the no arbitrage condition hold for the ...
2
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0answers
118 views

How to interpret DV01 in terms of PCA equivalent?

I have computed the PCs for daily changes in the UST yield curve over the last 5 years using the covariance matrix and can explain 94% of the variance using the first two components, which is good ...
0
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1answer
95 views

Which market developments are we likely to see within the next years?

I am working on an analysis to estimate financial risks, especially for pension funds. More specifically, I am trying to define some stress scenarios which could have an affect on the solvency of a ...
0
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0answers
44 views

Practical way to estimate the sensitivity of equities to a rising interest rate scenario

As part of a scenario testing exercise, I want to test the P&L impact of a 100 bps upward parallel shift in real rates on a portfolio of public equities. This will be calculated in two separate ...
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0answers
41 views

Does it make sense to calculate an option price in future (at t+1)?

Often I ask myself whether it makes sense to calculate the price of a Call at t+1 supposing for example that underlying asset does no move i.e. $S_{t+1} = S_{t}$ ...
1
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1answer
127 views

CCAR Shocks Scenario

I was going through CCAR-2018-severely adverse market shocks file and under the tab: Equity by Geography, I found these shocks. I have two questions: 1) Whether the shocks to Vol points are in % ...
1
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1answer
64 views

Commercial providers of scenario analysis and modeling

What are the major commercial providers that specialize in modeling the impact of specific global events on asset class performance? I'm familiar with Oxford Economics' Global Scenario Service, ...
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0answers
119 views

Multi objective optimization Swaption/Caplets joint Calibration

People suppose that we have a two asset type portfolio optimization (as Intrument Type 1 and 2). In the each portfolio refered by the instrument type there are 2 asset so we have four asset in total. ...
1
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1answer
152 views

testing stressed VaR

How can you compare stressed VaR estimates? What are statistical tests for assessing the quality of stressed VaR estimates? I think the VaR Coverage test for example by Christoffersen (1988) would ...
0
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1answer
97 views

Should price impact be the same for positive/negative implied volatility shocks?

I am using a vendor system to stress a portfolio which contains (among others) derivatives with implied volatility exposure. The issue is that when using a 1000 bps implied volatility stress upwards ...
4
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1answer
924 views

Stress Testing for VaR

I am trying to perform stress testing for VaR and have taken into consideration two methods:- 1. Sensitivity analysis 2. Historical scenario analysis. According to the Derivatives Policy group we ...
0
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1answer
115 views

Do I need simulink to model the risks of an option portfolio

I wish to buy Matlab Home and learn to model the risks of a derivatives portfolio and then stress test it. So I am guessing I will need : Stochastic calculus Linear algebra Stats/Probability Some ML ...
8
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2answers
2k views

How to check that an interest rate curve is arbitrage free

I have 2 interest rate curves (LIBOR 3M and OIS). I want to create stress scenarios for those two curves. Is it possible that some scenarios will make my term structure arbitrageable? How can I test ...
1
vote
1answer
122 views

Standard Formula for Solvency II

I am qualified in Mathematics and Physics but would like to have a career in Finance. I will be starting an M.Sc. In Financial Mathematics next October but am already reading about certain topics to ...
3
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1answer
829 views

Stress Testing Methods

I'm working on the following task: Given quarterly data: a time series representing the 1-year realized (10 years of data) rates of default on a portfolio of mortgages a slew of ...
5
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1answer
903 views

Definition of risk factors for market risk scenario testing

I am doing a research for stress testing in market risk. The usual process I found out for scenario testing is: Define risk factors upon the portfolio Define the desired scenarios Vary the risk ...
4
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1answer
484 views

Market risk stress testing?

I am doing a research for a paper for market risk stress testing. In fact I found some information on the web about this important topic such as: Stress Testing from Art to Science Stress Testing ...
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0answers
366 views

Stress testing covariance

Going one level beyond stressed scenarios, to parameters e.g. for a VaR measure: what are the most common approaches for stressing a covariance/correlation matrix, especially taking portfolio exposure ...