Balance Sheet Stress testing course

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).