Incorporating funding costs in top-down stress tests

Abstract

Centralbanker og tilsynsmyndigheder foretager regelmaessigt stresstest af banksektoren. I takt med at tab akkumuleres i stressscenarier, svaekkes bankernes solvens, og de skal betale en højere rente på deres gaeld. Jeg undersøger en raekke risikomål, som er udledt fra Merton-lignende modeller, og undersøger sammenhaengen mellem disse risikomål og bankers finansieringsomkostninger. Endelig beskriver jeg en metode til at indarbejde stigninger i fundingomkostninger i en "top-down" stresstest.

Agent-Based Model of System-Wide Implications of Funding Risk

“…We account for this mechanism in the fourth step. The significant relationship between the solvency and funding costs was econometrically confirmed by Babihuga and Spaltro (2014); Schmitz et al (2017) (for an international sample of banks), Aymanns et al (2016) (for the US market) and Korsgaard (2017). Interestingly, they point out to some nonlinearities of the relationship with respect to the magnitude of the solvency shock and level of solvency (i.e.…”

Common correlated effect cross‐sectional dependence corrections for nonlinear conditional mean panel models

“…Therefore, we expect to see a negative and nonlinear relationship between banks' capital ratios and their riskiness. In different contexts, Aymanns, Caceres, Daniel, and Schumacher (2016), Korsgaard (2017), and Dent et al (2018) explore the nonlinearities stemming from deteriorations in banks' solvency levels.…”