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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Hardcoverpages. Table of contents Acknowledgements. Briefly, Rebona I read this one “because of” work although not “for” work. Added to Your Shopping Cart.

Coherent Stress Testing

He considers the difference between the bounded rationality and cognitive bias schools, before analysing the dangers of representativeness and causal-diagnostic biases. A Bayesian Approachindustry expert Riccardo Rebonato presents a groundbreaking new approach to this important but often undervalued part of the risk management toolkit. 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.

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Human intuitions work better in causal than diagnostic mode, making some conditional probabilities strezs to estimate than others. I won’t bore my dear Goodreads friends with technical nuances, but I thought the book was quite interesting.


Coherent Stress Testing by Riccardo Rebonato

Open Preview See a Problem? Part I looks at stress testing and at its role in modern risk management.

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

It discusses the distinctions between risk and uncertainty, the rdbonato types of probability that are used in risk management today and for which tasks they are best used.

Ranjan marked it as to-read Jul 02, Federico Carrone marked it as to-read Sep 30, Even cohherent attempts to estimate such conditional probabilities can easily produce incoherent — logically incompatible — results.

Want to Read Currently Reading Read. Want to Read saving…. 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.

It turns out that having only some marginal probabilities puts significant bounds on the joint cojerent, and having some singly conditioned probabilities makes those bounds tighter. Joseph added it Feb 11, Markku is currently reading it Aug 10, Part II lays down the quantitative foundations for the concepts described in the rest of the book.


In part IV the author addresses more practical questions such as embedding the suggestions of the book into a viable governance structure. Rebonato concludes with some practical concerns. Dolores marked it as to-read Jun 12, Taking Liberties Riccardo Rebonato. The book is split into four parts. Thanks for telling us about the problem.

Coherent Stress Testing (Riccardo Rebonato) – book review

Further doherent can be obtained using “Bayesian nets”, where the risk manager delineates the causal relationships between events, effectively marking some as independent or conditionally independent. 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.

Attila Rebak rated it really liked it Dec 08, You are currently using the site but have requested a page doherent the site. Part III takes readers through the application of thetools discussed in part II, and introduces two different systematicapproaches to obtaining a coherent stress testing output that cansatisfy the needs of industry users and regulators.