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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A Bayesian Approachindustryexpert Riccardo Rebonato presents a groundbreaking new approach tothis important but often undervalued part of the risk managementtoolkit. Marginal and Conditional Probabilities. The book is split into four parts. He ranges widely intellectually — his footnotes are always worth reading — and offers useful suggestions for further reading at the end of each chapter. Human intuitions work better in causal than diagnostic mode, making some conditional probabilities easier to estimate than others.
Coherent Stress Testing: A Bayesian Approach to the Analysis of Financial Stress
Would you like to change to the site? The goal then is to find the complete set of joint probabilities, which allow calculation of such useful things as total expected losses and risk-adjusted returns.
It discusses thedistinctions between risk and uncertainty, the different types ofprobability that are used in risk management today and for whichtasks they are best used.
Rebonato envisages a risk manager making order of magnitude estimates of marginal and conditional probabilities for maybe a dozen binary events.
Domlim marked it as to-read Nov 10, Further constraints can be obtained using “Bayesian nets”, where the risk manager delineates the causal relationships between events, effectively marking some as independent or conditionally independent.
To see what your friends thought of this book, please sign up. In Coherent Stress Testing: Volatility and Correlation Riccardo Rebonato E-bok.
Part Reboanto looks at stress testing and at its role in modern risk management. Volatility and Correlation Riccardo Rebonato. Rebonato begins by arguing that models are indispensable and that we should accept a plurality of models. He accomplishes this via a nice tool that I had never encountered before, called a Bayesian net sounds more complicated than it is.
And I really enjoyed Coherent Stress Testing myself. Based on the author’s extensive work, research and presentations in the area, the book fills a gap in quantitative risk management by introducing a new and very intuitively appealing approach to stress testing based on expert judgement and Bayesian networks.
Jeno Lapua marked it as to-read Jun 06, The book is split into four parts. Volatility and Correlation Riccardo Rebonato Inbunden. Just a moment while we sign you in to your Goodreads account. Even simple attempts to estimate such conditional strexs can easily produce incoherent — logically incompatible — results.
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.
Part II lays down thequantitative foundations for the concepts described in the rest ofthe book. Knatoli marked it as to-read Mar 20, Itconstitutes a radical departure from the traditional statisticalmethodologies based on Economic Capital or Extreme-Value-Theoryapproaches. 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.
Published July 13th by Wiley first published May 21st And if the probabilities assigned by the risk manager prove incoherent, Rebonato provides an algorithm for modifying them.
Coherent Stress Testing – E-bok – Riccardo Rebonato () | Bokus
Dolores marked it as to-read Jun 12, Here Rebonato suggests some ways of combining “top down” approaches driven by macroeconomic structural risks with “bottom up” approaches driven by trading book risks.
He considers the difference between the bounded rationality and cognitive bias schools, before analysing the dangers of representativeness and causal-diagnostic biases. Taking Liberties Riccardo Rebonato Inbunden. Books by Riccardo Rebonato. Refresh and try again.
Coherent Stress Testing (Riccardo Rebonato) – book review
Trivia About Coherent Stress T Christopher marked it as to-read Jun 05, I won’t bore my dear Goodreads friends with technical nuances, but I thought the book was quite interesting.
Briefly, Rebonato’s answer to this conundrum is to develop a framework that leans heavily on human strress, but in a formal and transparent way.
No trivia or quizzes yet. Adam Troyer rated it liked it Feb 01, Hardcoverpages. There are no discussion topics on this book yet. Rebonato ocherent with some practical concerns. It constitutes a radical departure from the traditional statistical methodologies based on Economic Capital or Extreme-Value-Theory approaches. I read this one “because of” work although not “for” work. Based on the author’s rebonao work, research and presentations in the area, the book fills a gap in quantitative risk management by introducing a new and very intuitively appealing approach to stress testing based on expert judgement and Bayesian networks.
This is rebonati entirely peripheral concern, however. It constitutes a radical departure from the traditional statistical methodologies based on Economic Capital or Extreme-Value-Theory approaches. He continually emphasizes “sanity checking”, however, or reconsideration of the initial inputs and assumptions if they produce logical problems.
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. Permissions Request permission to reuse content from this site.