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Contribution Details
| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Approaches to assess similarity of scenarios constituting tail losses in portfolio loss models |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 75 |
| Date | 2019 |
| Abstract Text | The 2008 financial crisis showed that various approaches for monitoring risk within financial institutions demonstrated weaknesses. To address this, the stress testing framework has been strengthened, with a greater focus from the regulators’ side. Along with ad-hoc scenarios generated to assess the health of banks under stress, financial institutions have the possibility to develop alternative approaches yielding improved stress estimates. This project focuses on a statistical scenario generation methodology, which produces a wide set of plausible stress scenarios. We propose a methodology which assesses their similarity and determines representative scenarios, which are then leveraged for new simulations. In order to obtain a distribution of the representative scenario, the importance sampling algorithm is applied. Such an approach falls in the category of reverse stress testing. |
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