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November 2013

The European Central (ECB) has begun a year-long comprehensive assessment of the Euro area banking system. In this webinar, Moody's Analytics seeks to provide a default data-driven context for the ECB's exercise and a preview for what is to come.

Related Insights

U.K. Residential Mortgages Risk Weights: PRA Consultation Paper CP29/16

This paper presents best practices for addressing PRA Consultation Paper CP29/16.

October 2016 Pdf Dr. Juan M. Licari, Dimitrios Papanastasiou, Maria Valle del Olmo

Brexit Fallout: Using Scenario Analysis and a Systemic Risk Approach to Assess Corporate Credit Risk

The June 23rd referendum, in which UK voters chose to leave the European Union, has fanned financial volatility and may precipitate a recession in the UK economy. The updated economic and financial outlook has implications for corporate credit risk.

August 2016 WebPage Glenn Levine, Danielle Ferry, Dr. Samuel W. Malone

Probability-Weighted Outcomes Under IFRS 9: A Macroeconomic Approach

In this article, we discuss development of a framework that addresses the forward-looking and probability-weighted aspects of IFRS 9 impairment calculation using macroeconomic forecasts. In it, we address questions around the practical use of alternative scenarios and their probabilities.

June 2016 WebPage Barnaby Black, Glenn LevineDr. Juan M. Licari

Complying with IFRS 9 Impairment Calculations for Retail Portfolios

This article discusses how to address the specific challenges that IFRS 9 poses for retail portfolios, including incorporating forward-looking information into impairment models, recognizing significant increases in credit risks, and determining the length of an instrument's lifetime.

June 2016 WebPage Barnaby Black, Dr. Shirish ChinchalkarDr. Juan M. Licari

A Simulated Stress Test of the Corporate Loan Portfolios of Australia's Largest Banks

This whitepaper discusses the findings of our simulation exercise to the corporate loan portfolios of Australia's five largest banks.

March 2016 Pdf Danielle Ferry, David HamiltonGlenn Levine

Advanced Estimation and Simulation Methods for Retail Credit Portfolios: Frequentist vs. Bayesian Techniques

In this article, we compare the results of estimating retail portfolio risk parameters (e.g., PDs, EADs, LGDs) and simulating portfolio default losses using traditional – frequentist – methods versus Bayesian techniques.

December 2015 WebPage Dr. Juan M. Licari, Dr. Gustavo Ordóñez-Sanz, Chiara Ventura

Multi-Period Credit Risk Analysis: A Macro-Scenario Approach Presentation Slides

In this presentation, Dr. Juan Licari of Moody's Analytics will present an innovative framework for stochastic scenario generation that allows risk managers and economists to build multi-period environments, integrating conditional credit and market risk modeling to meet dynamic stress testing needs.

December 2015 Pdf Dr. Juan M. Licari

Market Risk Stress Testing Models Presentation Slides

In this presentation, Dr. Juan Licari presents a two-stage process that generates consistent, transparent scenario-specific forecasts for all relevant market and credit risk instruments, ensuring cross-consistency between projections for macroeconomic and financial series.

December 2015 Pdf Dr. Juan M. Licari

Market Risk Stress Testing Models

In this presentation we present a two-stage process that generates consistent, transparent scenario-specific forecasts for all relevant market and credit risk instruments, ensuring cross-consistency between projections for macroeconomic and financial series.

December 2015 WebPage Dr. Juan M. Licari

Multi-Period Credit Risk Analysis: A Macro-Scenario Approach

In this presentation, we present an innovative framework for stochastic scenario generation that allows risk managers and economists to build multi-period environments, integrating conditional credit and market risk modeling to meet dynamic stress testing needs.

November 2015 WebPage Dr. Juan M. Licari

IFRS 9 Impairment Webinar Series – Models for Implementation

This webinar discusses determining the best approaches for model development and governance for IFRS 9 Impairment calculations.

September 2015 WebPage Manuele Iorio, Dr. Juan M. Licari

Moody's Analytics Forecasts of RCA Commercial Property Price Indexes

This article discusses the methodology used in generating forecasts of the RCA commercial Property Prices Indices.

September 2015 Pdf Dr. Juan M. LicariOlga Loiseau-Aslanidi, Dr. José Suárez-Lledó

Multi-Period Stochastic Scenario Generation

Robust models are currently being developed worldwide to meet the demands of dynamic stress testing. This article describes how to build consistent projections for standard credit risk metrics and mark-to-market parameters simultaneously within a single, unified environment.

May 2015 WebPage Dr. Juan M. Licari, Dr. Gustavo Ordóñez-Sanz

Integrating Macroeconomic Scenarios into a Stress Testing Framework

This article describes the three principles that need to be understood and analyzed for banks to have a realistic chance of integrating alternative scenario work into their stress testing workflow.

November 2014 WebPage Dr. Juan M. Licari

Leveraging Stressed EDFs to Automate the Stress Testing Process

Regulators globally are increasingly pushing banks to make stress testing a routine exercise. As the process evolves and regulatory scrutiny increases, banks will benefit from easily deployable tools that simplify and streamline that process.

September 2014 WebPage Danielle Ferry

Comparing DFAST 2014 Estimates for CCAR Banks Under the FRB's Severely Adverse Scenario

This quantitative analysis of CCAR 2014 Severely Adverse scenarios, Moody's Analytics finds that the Federal Reserve Bank's (FRB's) and banks' own modeled estimates of capital ratios, revenue, net income, and loan credit losses are generally well aligned, although variations in all measures and across all banks are evident. In addition, the FRB's estimates are generally more conservative than those of the individual banks, reflecting differences in the FRB's industry-based models vs. the banks' portfolio specific models, treatment of missing or invalid data in the FRB's modeling approach, and assumptions about projected balance sheet volumes. The wide variation among bank modeled estimates and their overall alignment with FRB modeled estimates argues against banks targeting general industry benchmarks (such as average loss rates) and in favor of building models around their own business models and portfolio characteristics.

July 2014 Pdf Danielle Ferry, Daniel BrownAnna Krayn

Arbitrage-Free Scenarios for Solvency II

This article discusses a macroeconomic forecasting model that is able to generate arbitrage-free scenarios.

May 2014 WebPage Dr. Juan M. Licari, Dr. José Suárez-Lledó

Handling low default portfolios under stress

Regulators are challenging how to perform stress testing on low default portfolios by reviewing bank's PD models for RWA stress testing, in the absence of data they need to be convinced of the methodology used. In this Moody's Analytics webinar we put forward a statistical approach to stress testing low default portfolios with practical case studies

February 2014 Pdf Manuele Iorio, Dr. Juan M. Licari

Gauging the Risk of Europe's Banks: What Might the ECB Find?

The European Central (ECB) has begun a year-long comprehensive assessment of the Euro area banking system. The assessment is expected to include approximately 130 "significant" banks owning 85% of bank assets in the Euro area. The results will be closely watched by global market movers and stakeholders alike. In this paper, Moody's Analytics seeks to provide a default data-driven context for the ECB's exercise and a preview for what is to come.

December 2013 Pdf Danielle Ferry

Modelling and Stressing the Interest Rates Swap Curve

We present a two-step modelling and stress testing framework for the term structure of interest rates swaps that generates sensible forecasts and stressed scenarios out of sample. Our methodology is able to replicate two important features of the data: the dynamics of the spread across maturities and the alignment of the key swap rates tenor points to their corresponding government yields. Modern models of the term structure of interest rates typically fail to reproduce these and are not designed for stress testing purposes. We present results for the euro, the U.S. dollar, and British pound swap curves.

September 2013 Pdf Dr. Juan M. LicariOlga Loiseau-Aslanidi, Dr. José Suárez-Lledó

A Macroeconomic View of Stress Testing

This article discusses how developing deterministic scenarios form a macroeconomic view on stress testing that helps to uncover system or enterprise-wide vulnerabilities and assist banks in making more informed business decisions.

September 2013 WebPage Dr. Juan M. Licari, Dr. José Suárez-Lledó

Stress Testing of Retail Credit Portfolios

In this article, we divide the stress testing process for retail portfolios into four steps, highlighting key activities and providing details about how to implement each step.

September 2013 WebPage Dr. Juan M. Licari, Dr. José Suárez-Lledó

Stressed EDF Credit Measures for Western Europe

In this paper we describe the modeling methodology behind Moody's Analytics Stressed EDF measures for Western Europe. Stressed EDF measures are one-year, default probabilities conditioned on holistic economic scenarios developed in a large-scale,structural macroeconometric model framework.

October 2012 Pdf Danielle Ferry, Dr. Tony Hughes, Min Ding

Reverse Stress Testing from a Macroeconomic Viewpoint: Quantitative Challenges & Solutions for its Practical Implementation

This whitepaper examines the challenge of multiplicity in reverse stress testing, where the same outcome can be obtained with multiple combinations of risk factors and economic scenarios.

October 2012 Pdf Dr. Juan M. Licari, Dr. José Suárez-Lledó

An Integrated Approach to Stress-Testing Corporate Credit Risk

In this Viewpoints, we briefly recount the methodology used to construct Stressed EDF measures and then highlight some of their strengths for macroeconomic stress testing. History shows that Stressed EDF measures are capable of accurately predicting credit risk under severe economic onditions. The degree of granularity afforded by these firm-level PDs increases flexibility and improves precision in credit analytics where portfolio composition is important. We also show that Stressed EDF measures can be used to simulate the macroeconomic stress testing exercises of supervisory authorities, such as the Federal Reserve's Comprehensive Capital Analysis and Review (CCAR).

June 2012 Pdf Danielle Ferry

Stressed EDF™ Credit Measures for North America

In this paper we describe the modeling methodology behind Moody's Analytics Stressed EDF measures. Stressed EDF measures are one-year, default probabilities conditioned on holistic economic scenarios developed in a large-scale, structural macroeconometric model framework. This approach has several advantages over other methods, especially in the context of stress testing. Stress tests or scenario analyses based on macroeconomic drivers lend themselves to highly intuitive interpretation accessible to wide audiences – investors, economists, regulators, the general public, to name a few.

May 2012 Pdf Danielle Ferry, Dr. Tony Hughes, Min Ding

A Macro-finance View on Stress Testing

For most financial practitioners, stress-testing is a “must-do” activity, even if it is not a regulatory requirement. Such stress-testing encompasses a wide range of sophisticated and quantitative exercises, including assessments of market, credit and liquidity risks. This article discusses several approaches and outlines a foundation for a robust and consistent stress-testing framework.

May 2012 Pdf Andrea Appeddu, Dr. Juan M. Licari, Dr. José Suárez-Lledó

Reverse Stress Testing: Challenges and Benefits

Reverse stress testing is becoming recognised throughout the world for its benefits. This presentation explains what reverse stress testing is and what it can achieve, along with the challenges it presents. Here we show you why reverse stress testing can lead to a deeper understanding of an organisation's susceptibility to risk and why it is a valuable tool for any risk management strategy.

November 2010 Pdf Dr. Christian Thun, Dr. Juan M. Licari, Mark Zandi

Modeling and Stressing the Interest Rates Swap Curve

This article presents a two-step modeling and stress testing framework for the term structure of interest rates swaps that generates sensible forecasts and stressed scenarios out of sample. The results are shown for the euro, the US dollar, and British pound swap curves.

WebPage Dr. Juan M. LicariOlga Loiseau-Aslanidi, Dr. José Suárez-Lledó