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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Part I looks at stress testing and at its role in modern risk management. He considers the difference between the bounded rationality and cognitive bias schools, before analysing the dangers of representativeness and causal-diagnostic biases. He also argues for a Bayesian view of probabilities, introduces the problems of tail co-dependence, and looks at what is involved in moving from associative to causal models.
Coherent Stress Testing (Riccardo Rebonato) – book review
Coherent Stress Testing by Riccardo Rebonato. Mar 17, Nick Klagge rated it really liked it Shelves: There are no discussion topics on this book yet.
About the Author DR. Published July 13th by Wiley first published May 21st Joseph added rebomato Feb 11, Based on the author’s extensive work, research and presentationsin the area, the book fills a gap in quantitative risk managementby introducing a new and very intuitively appealin In Coherent Stress Testing: Table of contents Acknowledgements.
Series The Wiley Finance Series. Request permission to reuse content from this site.
Guido Previde Massara rated it really liked it May 17, Part I looks at stress testing and at its role in modern risk management. Goodreads helps you keep track of books you want to read. I won’t bore my teting Goodreads friends with technical nuances, but I thought the book was quite interesting. Lists with This Book.
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. In Coherent Stress Testing he explains how a risk manager might use conditional probabilities, coherency constraints, and causal networks in stress testing, incorporating rrebonato macroeconomic knowledge into their understanding and handling of tail risks.
And when it comes to causality Rebonato uses Judea Pearl’s work, claiming that as “deeply Tesing in nature”, but Pearl himself states that “the debate between Bayesians and frequentists Stress testing is positioned as a bridge between the statistical areas where VaR can be effective and the domain of total Keynesian uncertainty.
Renonato to Book Page. I read this one “because of” work although not “for” work. This doesn’t make it inaccessible — occasional technical terms such as “short gamma position” and “PV01” are either explained or not critical and easily looked up — but those whose interests are largely outside finance might prefer other books.
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The book is split into four parts. A Very Important Link. Rebonato also works through examples in more detail than the pure mathematicians may like. Based on the author’s extensive work, research and presentationsin the area, the book fills a gap in quantitative risk managementby introducing a new and very intuitively appealing approach cohfrent testing based on expert judgement and Bayesian networks. Christopher marked it as to-read Jun 05, Briefly, Rebona I read this one “because of” work although not “for” work.
Trivia About Coherent Stress T 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.
Jeno Lapua marked it as to-read Jun 06, The mathematics at the core of this looks intimidating at first glance, but is actually trivial — Venn diagrams, elementary probability, simple formalism — with some linear programming consigned to an appendix. A theoretical framework is illustrated with worked examples and accompanied by detailed advice on practical implementation.
Skickas inom vardagar. Part III takes readers through the application of thetools discussed in part II, and introduces two different systematicapproaches to obtaining a coherent stress testing output that cansatisfy the needs of industry users and regulators. In part IV the author addresses more practical questions such as embedding the suggestions of the book into a viable governance structure. P marked it as to-read Feb 13, Itconstitutes a radical departure from the traditional statisticalmethodologies based on Economic Capital or Extreme-Value-Theoryapproaches.
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