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November 2015

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.

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

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

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

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

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

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. 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.

November 2013 WebPage Danielle Ferry, Dr. Juan M. Licari

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

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

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