The main challenge for risk managers is to model the empirical characteristics observed in the market, especially volatility clustering. The advanced models are generally more successful in this regard, although the basic versions are easier to implement. Realistically, there will never be a perfect VaR model, which is one of the reasons why stress tests are a popular tool. They can be considered an ad hoc solution to the problem of model risk. The seminar explains the need for stress tests and how they might usefully be constructed.

 

At the end of Intrinsic Value's training seminar in stress testing the participant should be able to:

􀂅  Define Stress Testing.

􀂅  Describe the historical and conceptual context of stress testing.

􀂅  Explain Historical Scenarios Approaches.

􀂅  Demonstrate Hypothetical Scenarios Approaches.

􀂅  Demonstrate Algorithmic Approaches.

􀂅  Describe Extreme Value Theory as a Stress-Testing Method.