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Deutsche Bundesbank, Forschungszentrum, Frankfurt am Main >
Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/27669
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| Title: | | Stress testing of real credit portfolios  |
| Authors: | | Mager, Ferdinand Schmieder, Christian |
| Issue Date: | | 2008 |
| Series/Report no.: | | Discussion Paper, Series 2: Banking and Financial Supervision 2008,17 |
| Abstract: | | Stress testing has become a crucial point on the Basel II agenda, mainly as Pillar I estimates do not explicitly take portfolio concentration into account. We start from the credit portfolio of the German pension insurer being a cross-sectional representation of the German economy and subsequently compose three bank portfolios corresponding to a small, medium and large bank. We apply univariate and multivariate stress tests both by using the Internal Rating based (IRB) model and by a model that additionally allows for variation of correlation. In a severe multivariate stress scenario based on historical data for Germany IRB capital requirements increase by more than 80% with little differences between the credit portfolios. If stress testing is additionally applied to correlation, the Value-at-Risk increases by up to 300% and portfolio differences materialize. |
| Subjects: | | Credit Portfolio Exposure concentration Stress Testing Basel II Economic Capital |
| JEL: | | G21 G28 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank
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