STRESS TEST ANALYZER

STRESS TEST ANALYZER
Application for defining stress scenarios
STRESS TEST ANALYZER
Application for defining stress scenarios

 

Stress Test Analyzer allows to define stress scenarios and perform stress tests for periods of up to 20 years for any country. It uses macroeconomic scenarios to determine shift factors for the default rates and PDs of various industries, LB-Rating segments, regions and countries, and for CDS spreads. It can also generate stress-adjusted migration matrices and PD profiles.
In addition, stress scenarios are computed for observed CDS spreads, which can be used for various analyses covering any specified time period and quantile.

 

Scope of Application

Stress testing is becoming an increasingly important risk management technique. Apart from the EU-wide stress tests conducted by the EBA/ECB, national banking supervisors have also come to rely substantially on this instrument. At the same time, banks themselves are increasingly using stress tests in risk management.

With regard to credit risk, Stress Test Analyzer meets all methodological requirements of the EBA/ECB for EU-wide stress tests. In addition, it allows to perform stress tests required under national law (MaRisk, MaSan, KWG). By providing forecasts of CDS spreads, it covers certain aspects of market risk as well. The system can also be used solely for risk management purposes.

Methodology

The satellite models of Stress Test Analyzer use stress scenarios to forecast the development of default rates, LB-Rating PDs, and mean CDS spreads for each rating grade. Based on the specified macroeconomic stress scenarios, the system also generates stress-adjusted migration matrices and PD profiles.
The stress scenarios are forecasts of macroeconomic metrics such as GDP. These metrics can be specified for the period to be covered by the stress test. In addition, the system contains consistent historical macroeconomic stress scenarios as well as simulated macroeconomic stress scenarios based on a global model (GVAR), which can be used for various analyses including reverse stress testing.

LB-Rating default rates are forecast for regions, industries, and categories of LB-Rating modules. LB-Rating PDs are predicted for countries and categories of LB-Rating modules.
Stress-adjusted migration matrices and PD profiles and, as a result, grade-specific shifts for default rates and LB-Rating PDs are computed for each year of the forecast.
The CDS spread models provide projections of CDS spreads for each rating grade for companies and countries.
All results are represented graphically and the corresponding PD shifts or changes in CDS spreads are displayed. A portfolio can be specified in Stress Test Analyzer, for which the impact of the PD shifts can be examined. In addition, (adjusted) empirical stress scenarios can be determined for any selected group of countries or companies based on the complete CDS dataset. Quantiles of mid-spread changes can be analysed for any historical period.

Technology

Stress Test Analyzer is a web-based application available with both German and English text; it only requires a VPN (or CredNet) connection. Like all applications provided by RSU, it is operated under the strict security standards customary in the banking industry. Protected transmission channels and secure data storage at a level 3-certified data processing centre ensure a high degree of data security.