Ramadiah, Caccioli & Fricke’s research offers supervisors valuable insights into conducting more accurate stress tests. 

 

FNA’s Amanah Ramadiah and researchers Fabio Caccioli and Daniel Fricke offer supervisors valuable insights into conducting more accurate stress tests in the 2021 paper, ‘Reconstructing and Stress Testing Credit Networks’ which underlines the importance of understanding the consequences when taking a specific set-up when conducting stress tests, especially when data is incomplete. 

Despite many proposed financial network reconstruction methods, questions remain over which can best and most accurately reproduce a financial network suitable for conducting a stress test. As a key source of systemic risk, supervisors must use the most appropriate tools to reconstruct financial networks and yield accurate results. 

To investigate which method works best, the researchers perform a horse race to test four methods’ ability to reproduce the topological features of a credit network and the actual level of systemic risk. 

In many cases, the best method for reproducing the topological features of the network depends on the assumed criterion; however, in most instances, the chosen methods tended to underestimate systemic risk. 

The paper also explored the impact of specific policies proposed to make the financial system less vulnerable, such as merging or breaking up banks and can be read in full here

More News

The FMI Broadcast Session #3

How Challenger FMIs are revolutionizing Cross-border Payments   Thursday 23rd June 2022 Cross-border payments have always been in the spotlight. They have been criticized for being slow and costly, unable to cope with the demands for efficient payments among individuals, firms and financial institutions from different jurisdictions.  Challenger financial market infrastructures are trying to solve […]

The CBDC Broadcast Session #6

Central Banks and Private Money: The Past, Present and Future Thursday 30th June 2022, 14:00 (BST) Throughout history, technological developments, economic growth and the requirement for the effective execution of payments have driven changes to currencies and the financial system- from the first transatlantic cable to the rise of ATMs and credit cards 100 years […]

FNA named Central Banking’s Data Analytics Partner of the year at the FinTech and RegTech Global Awards 2022.

We’re delighted to announce that FNA are proud winners of Central Banking’s Data Analytics Partner award at the FinTech and RegTech Global Awards 2022. The award recognises the development of FNA’s CBDC Simulation solution built in partnership with Giesecke+Devrient. FNA’s CBDC Simulation solution uses an agent-based model which allows stakeholders to test scenarios and understand […]
Copyright FNA © 2022 | Privacy Policy