PDF | I present a new approach to stress testing that combines the elicitation of subjective (marginal or By so doing, stress events are placed in an approximate but coherent. ideas introduced for stress testing in Rebonato. In Coherent Stress Testing: A Bayesian Approach, industryexpert Riccardo Rebonato presents a groundbreaking new approach tothis important but often. we make the case why a ‘coherent’ stress testing programme, demanding though . and Rebonato () show how the ‘most likely’ (or Maximum Entropy).

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Coherent Stress Testing: A Bayesian Approach to the Analysis of Financial Stress

A Bayesian Approachindustry expert Riccardo Rebonato presents a groundbreaking new approach to this important but often undervalued part of the risk management toolkit. Marginal and Conditional Probabilities. Volatility and Correlation Riccardo Rebonato Inbunden. Here Rebonato suggests some ways of combining “top down” approaches driven by macroeconomic structural risks with “bottom up” approaches driven by trading book risks. Ranjan marked it as to-read Jul 02, I Data, Cohedent and Reality.

Briefly, Rebona I read this one “because of” work although not “for” work. Even simple attempts to estimate such conditional probabilities can easily produce incoherent debonato logically incompatible — results. The mathematics at the core of this voherent intimidating at first glance, but is actually trivial — Venn diagrams, elementary probability, simple formalism — with some linear programming consigned to an appendix.

This is an entirely peripheral concern, however.


Rebonato concludes with some practical concerns. I certainly hope the risk managers at my banks understand Rebonato’s ideas. Volatility and Correlation Riccardo Rebonato.

Added to Your Shopping Cart. Phil rated it really liked it Jan 06, He finishes with a brief outline of the governance and institutional aspects of stress testing, and with responses to some lines of criticism.

It constitutes coheernt radical departure from the traditional statistical methodologies based on Economic Capital or Extreme-Value-Theory approaches. Published July 13th by Wiley first published May 21st Skickas inom vardagar. Would you like to change to the site?

He ranges widely intellectually — his footnotes are always worth reading — and offers useful suggestions for further reading at the end of each chapter.

Coherent Stress Testing – E-bok – Riccardo Rebonato () | Bokus

Refresh and try again. October External links: Lists with This Book. Based on the author’s extensive work, research and presentations in the area, the book fills a gap in quantitative risk management by introducing a new and very intuitively appealing approach to stress testing based on expert judgement and Bayesian networks.

This is very different from the standard approach to stress testing, and I think it is really valuable to have people developing a diverse set of ideas about how one might go about the process.

Rebonato makes no attempt to use macroeconomic theory here, perhaps unsurprisingly given how primitive that is.

Perhaps the most difficult part of stress testing is the selection of stress scenarios. Stress testing is positioned as a bridge between the statistical areas where VaR can be effective and the domain of total Keynesian uncertainty. Permissions Request permission to reuse content from this site. It turns out that having only some marginal probabilities puts significant bounds on the joint probabilities, and having some singly conditioned probabilities makes those bounds tighter.


Part III takes readers through the application of the tools discussed in part II, and introduces two different systematic approaches to obtaining a coherent stress testing output that can satisfy the needs of industry users and regulators.

Christopher marked it as to-read Jun 05, To see what your friends thought of this book, please sign up. Rebomato I looks at stress testing and at its role in modern risk management. Return to Book Page. Adam Troyer rated it liked it Feb 01, In Plight of the Fortune Tellers Rebonato explained some of the revonato of data-driven approaches to managing extreme financial risks, based on VaR or similar approaches, but didn’t really present an alternative.

I read this one “because of” work although not “for” work. Thanks for telling us about the problem. It discusses thedistinctions between risk and uncertainty, the different types ofprobability that are used in risk management today and for whichtasks they are best used. The book is split into four parts. Open Preview See a Problem?

Volatility and Correlation Riccardo Rebonato E-bok. Trivia About Coherent Stress T In part IV the author addresses more practical questions such as embedding the suggestions of the book into a viable governance structure.