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A common framework for stress testing retail portfolios across countries

A common framework for stress testing retail portfolios across countries
A common framework for stress testing retail portfolios across countries
In this article, we collect consumer delinquency data from several economic shocks in order to study the creation of stress test models. We leverage the Dual-time Dynamics modeling technique to better isolate macroeconomic impacts whenever vintage-level performance data is available. The stress test models follow a framework described here of focusing on consumer-centric macroeconomic variables so that the models are as robust as possible when predicting the impacts of future shocks. We consider the Mexican Peso Crisis / Tequila Effect by examining Argentina; Asian Economic Crisis by considering Thailand, Indonesia, and Singapore; the Hong Kong SARS recession; and the relative lack of recessions in recent data from Canada and Australia.
dual-time dynamics, nonlinear dynamics, time series analysis, portfolio forecasting, scenario-based forecasting, retail lending, stress testing, macroeconomic scenarios
CRR-07-16
University of Southampton
Breeden, J.L.
00dd4046-648c-4ac9-98b8-252fc05000c3
Thomas, L.
a3ce3068-328b-4bce-889f-965b0b9d2362
Breeden, J.L.
00dd4046-648c-4ac9-98b8-252fc05000c3
Thomas, L.
a3ce3068-328b-4bce-889f-965b0b9d2362

Breeden, J.L. and Thomas, L. (2007) A common framework for stress testing retail portfolios across countries (University of Southampton Discussion Paper Series: Centre for Risk Research, CRR-07-16) Southampton, UK. University of Southampton 26pp.

Record type: Monograph (Working Paper)

Abstract

In this article, we collect consumer delinquency data from several economic shocks in order to study the creation of stress test models. We leverage the Dual-time Dynamics modeling technique to better isolate macroeconomic impacts whenever vintage-level performance data is available. The stress test models follow a framework described here of focusing on consumer-centric macroeconomic variables so that the models are as robust as possible when predicting the impacts of future shocks. We consider the Mexican Peso Crisis / Tequila Effect by examining Argentina; Asian Economic Crisis by considering Thailand, Indonesia, and Singapore; the Hong Kong SARS recession; and the relative lack of recessions in recent data from Canada and Australia.

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More information

Published date: 2007
Keywords: dual-time dynamics, nonlinear dynamics, time series analysis, portfolio forecasting, scenario-based forecasting, retail lending, stress testing, macroeconomic scenarios

Identifiers

Local EPrints ID: 58371
URI: https://eprints.soton.ac.uk/id/eprint/58371
PURE UUID: 7e62ab09-1763-43a6-9a81-ed4785892785

Catalogue record

Date deposited: 15 Aug 2008
Last modified: 13 Mar 2019 20:32

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