Research and publications

The ERI Stress Testing Tool: A Coherent Approach to Stress Testing

Risk management, prudential macro- and micro-regulation, portfolio allocation and, in general, the strategic analysis of financial and economic outcomes share the common unstated assumption that th ...

Author(s) :

Riccardo Rebonato

Summary :

Risk management, prudential macro- and micro-regulation, portfolio allocation and, in general, the strategic analysis of financial and economic outcomes share the common unstated assumption that the past conveys useful statistical information about the future. Indeed, a large part of contemporary finance rests on modern portfolio theory, which in turn places the statistically-determined vector of asset expected returns and their covariance matrix at centre stage.

Type : Working paper
Date : 01/09/2017