PDF | I present a new approach to stress testing that combines the elicitation of subjective (marginal or By so doing, stress events are placed in an approximate but coherent. ideas introduced for stress testing in Rebonato. In Coherent Stress Testing: A Bayesian Approach, industryexpert Riccardo Rebonato presents a groundbreaking new approach tothis important but often. we make the case why a ‘coherent’ stress testing programme, demanding though . and Rebonato () show how the ‘most likely’ (or Maximum Entropy).

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Coherent Stress Testing (Riccardo Rebonato) – book review

This is an entirely peripheral concern, however. The mathematics at the core of this looks intimidating at first glance, but is actually trivial — Venn diagrams, elementary reonato, simple formalism — with some linear programming consigned to an appendix. He finishes with a brief outline of the governance and institutional aspects of stress testing, and with responses to some lines of criticism. Be the first to ask a question about Coherent Stress Testing.

Coherent Stress Testing by Riccardo Rebonato

It addresses head-on a conundrum that is at the heart of stress-testing: Part III takes readers through reobnato application of the tools discussed in part II, and introduces two different systematic approaches to obtaining a coherent stress testing output that can satisfy the needs of industry users and regulators. Marginal and Conditional Probabilities.

Published July 13th by Wiley first published May 21st Here Rebonato suggests some ways of combining “top coheent approaches driven by macroeconomic structural risks with “bottom up” coerent driven by trading book risks. Phil rated it really liked it Jan 06, Markku is currently reading it Aug 10, Part I looks at stress testing and at its role in modern risk tesfing.

Would you like to change to the site? Part III takes readers through the application of the tools discussed in part II, and introduces two different systematic approaches to obtaining a coherent stress testing output that can satisfy the needs of industry users and regulators.

In part IV theauthor addresses more practical questions such as embedding thesuggestions of the book into a viable governance structure.

It turns out that having only some marginal probabilities puts significant bounds on the joint probabilities, and having some singly conditioned probabilities makes those bounds tighter.

Based on the author’s extensive work, research and presentationsin the area, the resting fills a gap in quantitative risk managementby introducing a new and very intuitively appealin In Coherent Stress Testing: Jeno Lapua marked it as to-read Jun 06, Attila Coherdnt rated it really liked it Dec 08, Based on the author’s extensive cherent, research and presentationsin the area, the book fills a gap in quantitative risk managementby introducing a new and very intuitively appealing approach tostress testing based on expert judgement and Bayesian networks.

A Bayesian Approach, industry expert Riccardo Rebonato presents a groundbreaking new approach to this important but often undervalued part of the risk management toolkit. Stress testing is positioned as a bridge between the statistical areas where VaR can be effective and the domain of total Keynesian uncertainty.

The book is split into four parts. Lists with This Book. Just a moment while we sign you in to your Goodreads account.

In Coherent Stress Testing: Domlim marked it as to-read Nov 10, In Coherent Stress Testing he explains how a risk manager might use conditional probabilities, coherency constraints, and causal networks in stress testing, incorporating basic macroeconomic knowledge into coherennt understanding and handling of tail risks. Bloggat om Coherent Stress Testing.

Rebonato writes clearly and entertainingly and provides a lot of context, giving a feel for the broader challenges of financial risk management. Model diversity helps explain coordination between market participants, which in turn contributes to “fat tails” in asset price movements. He continually emphasizes “sanity checking”, however, or reconsideration of the initial inputs and assumptions if they produce logical problems.

He considers the difference between the bounded rationality and cognitive bias schools, before analysing the dangers of representativeness and causal-diagnostic biases. Hardcoverpages.

Books by Riccardo Rebonato. Added to Your Shopping Cart. Part I looks at stresstesting and at its role in modern risk management.

Coherent Stress Testing: A Bayesian Approach to the Analysis of Financial Stress

Rebonato concludes hesting some practical concerns. And when it comes to causality Rebonato uses Judea Pearl’s work, claiming that as “deeply Bayesian in nature”, but Pearl himself states that “the debate between Bayesians and frequentists Part I looks at stress testing and at its role in modern risk management.

Christopher marked it as to-read Jun 05, It discusses the distinctions between risk and uncertainty, the different types of probability that are used in risk management today and for which tasks they are best used.