Bundesbank paper examines stress-test models

Deutsche Bundesbank headquarters, Frankfurt
The Deutsche Bundesbank in Frankfurt
Fabian Stürtz

A working paper published by the Deutsche Bundesbank presents a method to examine how well stress-test models predict whether specific banks may fail.

In Backtesting macro-prudential stress tests, Amanah Ramadiah, Daniel Fricke and Fabio Caccioli outline a generalised fire-sale stress-test model. They say their model “captures a wide range of behavioural assumptions with regards to banks’ liquidation dynamics under stress”.

Their model is based on network of common asset holdings using 2007

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