How to Improve the Quality of Stress Tests through Backtesting

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F12%3A10124480" target="_blank" >RIV/00216208:11230/12:10124480 - isvavai.cz</a>
Result on the web
<a href="http://journal.fsv.cuni.cz/storage/1252_325-346---gersl.pdf" target="_blank" >http://journal.fsv.cuni.cz/storage/1252_325-346---gersl.pdf</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
How to Improve the Quality of Stress Tests through Backtesting
Original language description
This paper describes the stress-testing framework used in the Czech central bank and focuses on the general question of how to calibrate the models and parameters used to stress test the most important risks in the banking system. The paper argues that stress tests should be calibrated conservatively to overestimate the risks so that sufficient buffers are in place for when adverse shocks materialize. However, to ensure that the stress test framework is conservative enough over time, backtesting, i.e.,comparison of the actual values of key financial variables with the predictions generated by the stress-testing models, should be a standard part of the stress-testing framework.
Czech name
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Czech description
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Type
J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)
CEP classification
AH - Economics
OECD FORD branch
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Project
<a href="/en/project/GAP403%2F10%2F1235" target="_blank" >GAP403/10/1235: Institutional Responses to Financial Market Failures</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)<br>S - Specificky vyzkum na vysokych skolach

Publication year
2012
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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