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| Identificatore numerico | 1873 |
| Identificatore completo | FingerKim99 |
| Autore/i | Finger, C.C.; Kim, J. |
| Anno | 1999 |
| Titolo | A Stress Test to Incorporate Correlation Breakdown |
| Tipo di Pubblicazione | paper |
| Altre Informazioni | The Risk Metrics Group, New York, Working Paper 99-08 Web Download. |
| Keywords | VAR - stress testing; Correlazione e dipendenza - Correlazione |
| Abstract | We introduce the broken arrow stress test, in which we estimate correlation levels in stress situations,
and apply these correlation levels to arrive at the expected loss for the peripheral assets in our stress
test. To identify correlation in stress situations, we specify the joint distribution of core and peripheral
assets as a mixture of normals. For the majority of cases, the asset returns are drawn from a normal
distribution with lower volatility and one level of correlation; on rarer hectic days, the asset returns are
drawn from a different normal distribution, with higher levels of volatility and a second correlation level.
In our example, stressed correlation levels illustrate significant changes in correlation for four of the 18
markets we examine. The broken arrow stress test produces a more reasonable expected loss estimate
than other parametric methods and does not present the problem with idiosyncrasies that is seen with
historical stress tests. |
| Importanza | media |
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