RISK MANAGEMENT THOUGHT LEADERSHIP

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Balance Sheet Stress testing course

 
19-20-21-January 2021

Course overview

The course will provide attendees with detailed tuition on stress testing from both theoretical as well as applied views. A hands-on perspective is followed. The use of Excel and R provides a comprehensive framework to be directly used on a day-by-day basis.

During the first day, macroeconomic scenarios are investigated from both an economic as well as time series (statistical) perspectives. Margin at risk and liquidity stress testing are explored through the lenses of the traditional asset and liability management framework. Case studies help consolidating the broader understanding of the key issues risk managers need to face.

A deep dive into credit risk analysis characterizes the second day. An introduction to portfolio credit risk modelling is followed by the exam of the relationships with Advanced Internal Rating Based (AIRB) modelling. Links between credit risk parameters and macroeconomic variables are studied through a series of case studies. Balance sheet is then explored both in terms of asset and liability stress testing projections as well as from a profit and loss viewpoint. On the latter, the focus is on pre-provision net revenues and credit loss projections.

During the third day, the regulatory capital analysis is conducted under stress. All key topics studied during day one and two are put into practice in order to assess the impact of adverse macroeconomic conditions on a Bank. Risk integration and reverse stress testing are finally studied as a key element of a comprehensive risk assessment process to be used both for managerial purposes as well as into the internal capital adequacy assessment process (ICAAP).

 
 

Meet our Course Director: Dr Tiziano Bellini, PhD (Statistics)

  • Worked in risk management and finance across Europe, London and New York for the past 20 years.
  • Experience include EY Financial Advisory Services in London, HSBC headquarter, Prometeia and other global leading companies.
  • Guest lecturer at the London School of Economics, Imperial College of London, University of Passau in Germany.
  • Doctorate in statistics from University of Milan and London School of Economics.
  • Authored the books “Stress Testing and Risk integration in Banks: a Statistical Framework and Practical Software guide in Matlab and R” and "IFRS 9 and CECL Credit Risk Modelling and Validation: A Practical Guide with Examples Worked in R and SAS" edited by Academic Press.
  • Authored papers published in European Journal of Operational Research (EJOR), Computational Statistics and Data Analysis (CSDA) and other top reviewed Journals. 
  • Referees of Journal of Banking and Finance (Elsevier) and Journal of Applied Statistics (Taylor &Francis) and other top Journals.
  • Trainer in risk management and statistics, he is also a Chartered Public accountant and Tax Expert.
 
 
AGENDA
 

Day 1

8.00 
Registration & Coffee
8.30
Introduction to macroeconomic analysis
 
- Course overview
- Macroeconomic scenario analysis
10.00
Coffee Break
10.30
Time series analysis for stress testing
 
- Hints on Vector Auto-Regression (VAR) and Global Vector Auto-Regression (GVAR) modelling
- Macroeconomic scenario analysis in R
12.00
Lunch
13.30
Margin at risk stress testing
 
- Asset and liability management gap analysis
- Net interest income (NII) analysis
- Behavioural modelling in R
- Case study: stress test on NII behavioural modelling
14.30
Coffee Break
15.00
Liquidity risk stress testing
 
- Managerial approach
- Liquidity coverage ratio (LCR) 
- Net stable funding ratio (NSFR)
- Case study: stress test on LCR and NSFR
16.30
Wrap up day 1

 

Day 2

8.30
Portfolio credit risk modelling
 
- CreditMetrics
- Credit portfolio modelling with copulas
10.00
Coffee Break
10.30
From portfolio credit modelling to advanced internal rating based formula
 
- Risk weighted asset analysis: standardized and advanced approaches
- Case study: credit portfolio modelling and RWA in R
12.00
Lunch
13.00
Credit risk stress testing
 
- How to link credit risk parameters and macroeconomic variables
- Case study: credit risk stress testing
14.30
Coffee Break
15.00
Balance sheet management stress testing
 
- Balance sheet projections
- Profit and loss projections
- Case study: balance sheet stress testing
16.30
Wrap up day 2

 

Day 3

8.30
Regulatory capital and RWA stress testing
 
- Regulatory capital analysis
- RWA aggregation
- Case study: capital ratios stress testing 
10.00
Coffee Break
10.30
Risk integration
 
- Top down risk integration modelling
- Bottom-up modelling
12.00
Lunch
13.00
Economic capital and liquidity integration
 
-Case study: economic capital and liquidity integration in R
14.30
Coffee Break
15.00
Reverse stress testing
 
- Reverse stress testing objective function
- Vulnerability thresholds
- Bank specific event causing bankruptcy
- Macroeconomic scenarios causing a bank’s failure
- Case study: what if analysis for reverse stress testing
16.30
Wrap up day 3
 

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