Transmission of Macroeconomic Shocks to Risk Parameters: Their uses in Stress Testing

09/19/2018

∙

by   Helder Rojas, et al.

∙

0

∙

share

In this article, we are interested in evaluating the resilience of the financial portfolios under extreme economic conditions. Therefore, we use empirical measures that characterize the transmission process of macroeconomic shocks to risk parameters. We propose the use of an extensive family of models, called General Transfer Function Models, which condense well the characteristics of the transmission described by the impact measures. The procedure for estimating the parameters of these models is described using the Bayesian approach, using the prior information contained in the impact measures. In addition, we illustrate the use of the estimated models from the credit risk data of a portfolio.