Can We Take the 'Stress' Out of Stress Testing? Applications of Generalized Structural Equation Modeling to Consumer Finance

José J. Canals-Cerdá
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Abstract

Financial firms, and banks in particular, rely heavily on complex suites of interrelated statistical models in their risk management and business reporting infrastructures. Statistical model infrastructures are often developed using a piecemeal approach to model building, in which different components are developed and validated separately. This type of modeling framework has significant limitations at each stage of the model management life cycle, from development and documentation to validation, production, and redevelopment. We propose an empirical framework, spurred by recent developments in the implementation of Generalized Structural Equation Modeling (GSEM), which brings to bear a modular and all-inclusive approach to statistical model building. We illustrate the “game changing” potential of this framework with an application to the stress testing of credit risk for a representative portfolio of mortgages; we also extend it to the analysis of the allowance for credit loss under the novel Current Expected Credit Loss (CECL) accounting regulation. We illustrate how GSEM techniques can significantly enhance every step of the modeling framework life cycle. We also illustrate how GSEM can be used to combine various risk management projects and tasks into a single framework; we specifically illustrate how to seamlessly integrate stress testing and CECL (or IFRS9) frameworks and champion, and challenger, modeling frameworks. Finally, we identify other areas of model risk management that can benefit from the GSEM framework and highlight other potentially fruitful applications of the methodology.
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我们能把压力测试中的“压力”去掉吗?广义结构方程模型在消费金融中的应用
金融公司,特别是银行,在其风险管理和业务报告基础设施中严重依赖复杂的相互关联的统计模型套件。统计模型基础结构通常使用一种零碎的模型构建方法来开发,在这种方法中,不同的组件被单独开发和验证。这种类型的建模框架在模型管理生命周期的每个阶段(从开发和文档编制到验证、生产和再开发)都有明显的限制。我们提出了一个经验框架,受到最近在实现广义结构方程建模(GSEM)的发展的刺激,它带来了一个模块化和全包的方法来建立统计模型。我们通过应用于典型抵押贷款组合的信贷风险压力测试来说明该框架“改变游戏规则”的潜力;我们还将其扩展到分析新的当期预期信用损失(CECL)会计准则下的信用损失准备。我们演示了GSEM技术如何显著增强建模框架生命周期的每一步。我们还说明了如何使用GSEM将各种风险管理项目和任务组合到一个框架中;我们特别说明了如何无缝地集成压力测试和CECL(或IFRS9)框架以及冠军和挑战者建模框架。最后,我们确定了可以从GSEM框架中受益的模型风险管理的其他领域,并强调了该方法的其他潜在的富有成效的应用。
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