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December 2016

Since the global financial crisis, bank stress testing has become an essential part of regulators’ toolkits for monitoring and maintaining financial stability. The impact of a bank’s stress test results can have large implications for its operations, its shareholders, and for the economy at large. Anticipating the results of a formal stress test through simulation can enhance a bank's internal risk management as well as provide strategic business insight.

In this webinar, you will learn:

Methods for stressing default probabilities on particular macroeconomic scenarios.

How to implement stressed PDs in a portfolio simulation methodology to calculate scenario specific expected loan loss rates.

Insight from two simulation case studies for corporate loan portfolios: (1) The Federal Reserve’s CCAR/DFAST stress tests, and (2) a stress test for the five largest banks in Australia approximating the Australian Prudential Regulation Authority’s (APRA) stress test.

How to implement simulation analysis as an efficient repeatable and reduced computational costs process.

Related Insights

Preparing for Defaults in China's Corporate Credit Market

In this webinar Moody’s Analytics discuss the Marco-economic and credit market conditions likely to affect the future risk of default for Chinese companies; way to measure and manage the default risk of Chinese firms, and strategies for early detection of default risk.

August 2016 WebPage David HamiltonGlenn Levine, Irina Baron

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

Simulating a Stress Test of the Corporate Loan Portfolios of Australia's Largest Banks

In this webinar, David Hamilton presents the results of a simulated stress test of the corporate loan portfolios of Australia’s five largest banks (by asset size) conducted by Moody’s Analytics.

March 2016 WebPage David Hamilton

Measuring Systemic Risk in the SE Asia Financial System

In this webinar, Moody’s Analytics combines the techniques of network analysis with the richness of Moody’s CreditEdge™ platform to compute systemic risk measures spanning the last 20 years for five major southeast Asian economies.

June 2015 WebPage David HamiltonDr. Samuel W. Malone

Measuring Systemic Risk in the Southeast Asian Financial System

This article looks back at the Asian financial crisis of 1997-1998 and applies new methods of measuring systemic risk and pinpointing weaknesses, which can be used by today’s financial institutions and regulators.

Identifying At-Risk Names in Your Credit Portfolio Webinar

Identifying At-Risk Names in Your Credit Portfolio

October 2013 WebPage David Hamilton, Irina Makarova

Best Buy Co., Inc.

Through much of its history Best Buy was considered one of the most successful retail stores in the US. However, since 2010 the electronics retailer has faced business and financial challenges that are placing increasing pressure on its credit quality.

October 2012 Pdf David Hamilton, Irina Makarova

Research in Motion Ltd.

RIM does not have traded bonds or CDS from which to observe credit spreads, and is not rated by Moody's Investors Service. However, Moody's Analytics' public EDF measure effectively captures and quantifies changes in the company's credit risk.

June 2012 Pdf Irina Makarova, David Hamilton

Shandong Helon Company Ltd.

The EDF measure for Shandong Helon Co.'s has signaled a high level of default risk since the time of the financial crisis in 2008. In 2010 its EDF measure began to trend in a range suggesting heightened risk of default, and in June 2011 its EDF jumped from 2.6% to over 7%. Its EDF measure jumped again in April 2012 to over 10%.

May 2012 Pdf David Hamilton, Irina Makarova

Bankia S.A.

Bankia SA's one-year probability of default jumped sharply in May, from 0.45% at the start of the month to 2.24% as of May 24.

May 2012 Pdf Irina Makarova, David Hamilton

Through-the-Cycle EDF™ Credit Measures

Through-the-Cycle EDF™ (TTC EDF) credit measures are one-year probabilities of default that are largely free of the effect of the aggregate credit cycle, primarily reflecting a firm's enduring, long-run credit risk trend. TTC EDF measures are useful in applications in which a stable PD input is desirable, and for which the expected cost of adjusting credit exposures as PD signals change outweighs the expected cost of negative credit events (such as default).

August 2011 Pdf David Hamilton, Min Ding, Zhao Sun

Banks and their EDF™ Measures Now and Through the Credit Crisis: Too High, Too Low, or Just About Right?

Financial institutions, particularly banks, were at the heart of the credit crisis and subsequent recession, and defaulted at unprecedented rates. It will be a long time before names like Lehman Brothers, Bear Stearns, and Northern Rock fade from the memories of investors and risk managers. Not surprisingly, the experience has redoubled interest in finding effective and efficient ways to provide early warning of credit distress for such entities.

December 2010 Pdf Tony Smith, David Munves, David Hamilton