An ontology-based approach for bank stress testing

Research output: Chapters, Conference Papers, Creative and Literary Works (RGC: 12, 32, 41, 45)32_Refereed conference paper (with ISBN/ISSN)

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Detail(s)

Original languageEnglish
Title of host publicationProceedings of the Annual Hawaii International Conference on System Sciences
Pages3407-3415
StatePublished - 2013

Publication series

Name
ISSN (Print)1530-1605

Conference

Title46th Annual Hawaii International Conference on System Sciences, HICSS 2013
PlaceUnited States
CityWailea, Maui, HI
Period7 - 10 January 2013

Abstract

The 2008 banking crisis has demonstrated that there is the lack of effective methods for modeling and analyzing "exceptional but plausible" risk scenarios in bank stress testing. However, existing bank stress testing practices mainly focus on modeling probabilitybased risk factors and events in a "static snapshot" of the banking systems, but largely ignore the dynamic processes in which financial crisis events and their interactions creates various complex risk scenarios. In addition, the rare (low probability) risk events such as the bankruptcy of Lehman Brothers that can cause "exceptional but plausible" crisis scenarios are largely ignored due to the lack of appropriate modeling and analysis methods. To address this problem, we developed an approach called Banking Event-driven Scenario-oriented Stress Testing (or simply the BESST) which mainly includes three components: 1) a set of stress testing ontologies; 2) an event-driven scenario model (OESM); and 3) a scenario recommendation component. In addition, we show how to use BESST to model and examine "exceptional but plausible" stress testing scenarios in an example process of crisis events. In general, this research has provided the bank stress testing stakeholders a novel approach for modeling and analyzing the rare risk events and their dynamic processes in various financial crisis scenarios. © 2012 IEEE.

Citation Format(s)

An ontology-based approach for bank stress testing. / Yan, Jiaqi; Hu, Daning; Zhao, Leon.

Proceedings of the Annual Hawaii International Conference on System Sciences. 2013. p. 3407-3415 6480255.

Research output: Chapters, Conference Papers, Creative and Literary Works (RGC: 12, 32, 41, 45)32_Refereed conference paper (with ISBN/ISSN)