Incorporating behavioural and macroeconomic correlations for the prediction of bank capital for credit risk
提出一种同时模拟行为变量和宏观经济变量并保持其相关性的方法，用于更全面地压力测试银行信用组合，以改进资本预测。
Large banks are required to stress test their credit portfolios annually under Basel III. Stress testing credit portfolios to macroeconomic shocks at account level involves parameterising a model predicting probability of default followed by hypothesising specific shocks or by simulation to derive a value at risk (VaR) or expected shortfall (ES), 12 months into the future. Plausible simulation requires that the simulated values of the macroeconomic variables retain their correlated relationships. But the probability of default is also correlated with time-varying behavioural variables, which in turn are correlated with the macroeconomy. Simulation studies have estimated the VaR when mutually consistent macroeconomic values have been simulated or when behavioural variables have been simulated but not when both are simulated. In this article, we present a method to simulate both behavioural and macroeconomic variables into the future whilst maintaining the correlation structure between them to derive a more comprehensive simulation methodology to stress test a credit portfolio.