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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Table of contents Acknowledgements. Dolores marked it as to-read Jun 12, He considers the difference between the bounded rationality and cognitive bias schools, before analysing the dangers of representativeness and causal-diagnostic biases. Sterss marked it as to-read Feb 13, Skickas inom vardagar. He finishes with a brief outline of the governance and institutional aspects of stress testing, and with responses to some lines of criticism.

Coherent Stress Testing

Trivia About Coherent Stress T The mathematics at the core of this looks intimidating at first glance, but is actually trivial — Venn diagrams, elementary probability, simple formalism — with some linear programming consigned to an appendix. Rebonato makes tessting attempt to use macroeconomic theory here, perhaps unsurprisingly given how primitive that is.

Series The Wiley Finance Series. Taking Liberties Riccardo Rebonato.

Stress testing is positioned as a bridge between the statistical areas where VaR can be effective and the domain of total Keynesian uncertainty.

I Data, Models rfbonato Reality. Books by Riccardo Rebonato. Permissions Request permission to reuse content coherenr this site. Goodreads helps you keep track of books cohereny want to read. In Plight of the Fortune Tellers Rebonato explained some of the limitations of data-driven approaches to managing extreme financial risks, based on VaR or similar approaches, but didn’t really present an alternative.

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Rebonato envisages a risk manager making order of magnitude estimates of marginal and conditional probabilities for maybe a dozen binary events. This is an entirely peripheral concern, however.

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Want to Read saving…. Published July 13th by Wiley first published May 21st A theoretical framework is illustrated with worked examples and accompanied by detailed advice on practical implementation. He accomplishes this via a nice tool that I had never encountered before, called a Bayesian net sounds more complicated than it is. Rebonato also works through examples in more detail than the pure mathematicians may like.

Want to Read Currently Reading Read. He continually emphasizes “sanity checking”, however, or reconsideration of the initial inputs shress assumptions if they produce logical problems.

Coherent Stress Testing – E-bok – Riccardo Rebonato () | Bokus

Rebonato concludes with some practical concerns. 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.

A Bayesian Approach, industry expert Riccardo Rebonato presents a groundbreaking new approach to this important but often undervalued part of the risk management toolkit.

Attila Rebak rated it really liked it Dec 08, Briefly, Rebonato’s answer to this conundrum is to develop a framework that leans heavily on human judgment, but in a formal and transparent way. The book is split into four parts. Based on the author’s extensive work, research and presentationsin the area, the book fills a gap in quantitative risk managementby introducing a new and very intuitively appealin In Coherent Stress Testing: In Coherent Stress Testing: In Coherent Stress Testing he explains how a risk manager might use conditional probabilities, coherency constraints, and causal networks in stress testing, incorporating basic macroeconomic knowledge into their understanding and handling of tail risks.

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In part IV the author addresses more practical questions such as embedding the suggestions of the book into a viable governance structure. This is very different from the standard approach to stress testing, and I think it is really valuable to have people developing a diverse set of ideas about how one might go about the process.

I won’t bore my dear Goodreads friends with technical nuances, but I thought the book was quite interesting. Rebonato writes clearly and entertainingly and provides a lot of context, giving a feel for the broader challenges of financial risk management.

It turns out that having only some marginal probabilities puts cohedent bounds on the joint probabilities, and having some singly conditioned probabilities makes those bounds tighter. Rebonato’s repeated emphasis on Bayesianism seems like a distraction, however. 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.

A Bayesian Approachindustry expert Riccardo Rebonato presents a groundbreaking new ccoherent to this important but often undervalued part of the risk management toolkit. In part IV theauthor addresses more practical questions such as embedding thesuggestions of the book into a viable governance structure.

Cohdrent II lays down thequantitative foundations for the concepts described in the rest ofthe book. Marginal and Conditional Probabilities. No trivia or quizzes yet. The book is split into four parts. Bloggat om Coherent Stress Testing. Lists with This Book.