Financial stress testing of Tunisian banking sector in worst case scenarios
by Ben Mbarek Hassene; Imed Gammoudi; Mohamed El Ghourabi
International Journal of Entrepreneurship and Small Business (IJESB), Vol. 39, No. 1/2, 2020

Abstract: Financial stress testing (FST) is a key technique for quantifying financial vulnerabilities; it is an important risk management tool. FST should ask which scenarios lead to big loss with a given level of plausibility. However, traditional FSTs are criticised firstly for the plausibility that rose against stress testing and secondly, for being conducted outside the context of an econometric risk model. Hence, the probability of a sever scenario outcome is unknown and many scenarios yet plausible possibilities are ignored. The aim of this paper is to propose a new FST framework for analysing stress scenarios for financial economic stability. Based on worst case scenario optimisation, our approach is able first to identify the stressful periods with transparent plausibility and second to develop a methodology for conducting FST in the context of any financial-economic risk model. Applied to Tunisian economic system data, our proposed framework identifies more harmful scenarios that are equally plausible leading to stress periods not detected by classical methods.

Online publication date: Mon, 23-Dec-2019

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Entrepreneurship and Small Business (IJESB):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com