Macro stress tests and history-based stressed PD : the case of Hong Kong
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
| Original language | English |
|---|---|
| Pages (from-to) | 251-260 |
| Journal / Publication | Journal of Financial Regulation and Compliance |
| Volume | 16 |
| Issue number | 3 |
| Publication status | Published - Aug 2008 |
Link(s)
Abstract
Purpose - The purpose of this paper is to discuss issues relating to stress testing methods for credit risks in banks. Also, it suggests a solution to bank supervisors on evaluating stress test results.
Design/methodology/approach - Discussion is based on cases analysis on a stress period of the Hong Kong banking sector.
Findings - The paper finds that econometric modeling does not work well modeling stress scenarios. The stressed probability of default (PD) provided by Basel II would be much higher than stressed PD observed in the history.
Practical implications - Bank supervisors should develop cost-effective methods to monitor the stress test results reported by banks.
Originality/value - The paper addresses the issues of stress testing and provides a practical solution for bank supervisors to monitor stress test results reported by banks.
Design/methodology/approach - Discussion is based on cases analysis on a stress period of the Hong Kong banking sector.
Findings - The paper finds that econometric modeling does not work well modeling stress scenarios. The stressed probability of default (PD) provided by Basel II would be much higher than stressed PD observed in the history.
Practical implications - Bank supervisors should develop cost-effective methods to monitor the stress test results reported by banks.
Originality/value - The paper addresses the issues of stress testing and provides a practical solution for bank supervisors to monitor stress test results reported by banks.
Research Area(s)
- Econometrics, Financial institutions, Financial models, Hong Kong, Modelling, Stress
Citation Format(s)
Macro stress tests and history-based stressed PD: the case of Hong Kong. / Wong, Michael Chak-sham; Lam, Yat-fai.
In: Journal of Financial Regulation and Compliance, Vol. 16, No. 3, 08.2008, p. 251-260.
In: Journal of Financial Regulation and Compliance, Vol. 16, No. 3, 08.2008, p. 251-260.
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
