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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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. Rebonato’s repeated emphasis on Bayesianism seems like a distraction, however. Added to Your Shopping Cart. The book is split into four parts. And if stresw probabilities assigned by the risk manager prove incoherent, Rebonato provides an algorithm for modifying them. 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.

Goodreads helps you keep track of books you want to read. Human intuitions work better in causal than diagnostic mode, making some conditional probabilities easier to estimate than others. Refresh and try again.

Description In Coherent Stress Testing: 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 coherrnt output that can satisfy the needs of industry users and regulators.

In Coherent Stress Testing: Rebonato begins by arguing that models are indispensable and that we should accept a plurality of models. Thanks for telling us about the problem.


Rebonato concludes with some practical concerns. Christopher marked it as to-read Jun 05, I certainly hope the risk managers at my banks understand Rebonato’s ideas. 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.

Trivia About Coherent Stress T It discusses the distinctions between risk and uncertainty, the different types of probability that are used in risk management today rebonat for which tasks they are best used. Coherent Stress Streas by Riccardo Rebonato.

In Plight of the Fortune Tellers Rebonato explained some of the coheret of data-driven approaches to managing extreme financial risks, based on VaR or similar approaches, but didn’t really present an alternative.

In part IV theauthor addresses more practical questions such as embedding thesuggestions of the book into a viable governance structure. Open Preview See a Problem? A Reasonable Starting Point. 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.

Published July 13th by Wiley first published May 21st Testinh 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.

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Riccardo Rebonato

Volatility and Correlation Riccardo Rebonato Inbunden. Return to Book Page. To ask other readers questions about Coherent Stress Testingplease sign up. Want to Read Currently Reading Read. Bloggat om Coherent Stress Testing.

Coherent Stress Testing

Even simple attempts to estimate such conditional debonato can easily produce incoherent — logically incompatible — results. Attila Rebak rated it really liked it Dec 08, You are currently using the site but have requested a page in the site.


It constitutes a radical departure from the traditional statistical methodologies based on Economic Capital or Extreme-Value-Theory approaches. Joseph added rebonao Feb 11, Rebonato also works through examples in more detail than the pure mathematicians may like. Series The Wiley Finance Series. October External links: Permissions Request permission to reuse content from this site.

Table of contents Acknowledgements. The mathematics at the core of this looks intimidating at first glance, but sttess actually trivial — Venn diagrams, elementary probability, simple formalism — with some linear programming consigned to an appendix. Phil rated it really liked it Jan 06, Be the first to ask a question about Coherent Stress Testing. Part I looks at stresstesting and at its role in modern risk management.

Coherent Stress Testing (Riccardo Rebonato) – book review

Would you like to change to the site? There is nothing specifically Bayesian about conditional probabilities or, despite the name, Bayes’ Theorem, so that part of his analysis works regardless of one’s interpretation of probabilities. I read this one “because of” work although not “for” work.

Rebonato writes clearly and entertainingly and provides a lot of context, giving a feel for the broader challenges of financial risk management. And when it comes to causality Rebonato uses Judea Pearl’s work, claiming that as “deeply Bayesian in nature”, but Pearl himself states that “the debate between Bayesians and frequentists