Work

Stress test methodologies under scrutiny: examining the interplay of regulatory and market risk metrics in Europe – a comparative analysis of 2011 and 2021

Year: 2025

Type: dissertation

Abstract: This thesis replicates and extends the analysis from “Testing Macroprudential Stress Tests: The Risk of Regulatory Risk Weights” by Acharya, Engle, and Pierret (2014). It investigates the relationship between capital shortfall metrics and the effectiveness of risk factors in predicting stress-induced risks, using EBA stress tests from 2011 and 2021 alongside market-based metrics like SRISK. The findings validate critiques of risk-weighted measures, highlight the alignment of leverage-based and market-based metrics, and advocate for combining market-based and regulatory approaches. Additionally, the analysis suggests the successful implementation of regulatory standards, such as Basel III, and their impact on regulatory stress tests.

Source: Portuguese National Funding Agency for Science, Research and Technology (RCAAP Project by FCT)

Author: Duckert, Geronimo

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: Fundação para a Ciência e a Tecnologia

Awards: G1516346500, G3257768443, G3821169523, Nova School of Business and Economics, Nova School of Business and Economics, G946021960

OpenAlex ID: W7034264862

Cites: 34

Cited by:

Related to: 10