Stress testing market factors of the spread of financial contagion

Abstract

Purpose and subject of research

The subject of research is the spread of financial market factors infections. The aim of the study is to develop a special algorithm to determine the expected impact on the change in risk factors in the case of different scenarios.

Research methodology

Used parametric approach, the method of random scenarios, Boolean Bayesian network.

Value results

The model allows the use of the characteristics that affect the distribution of financial infections: changes in interest rates, oil prices, gold, changes in profitability, other indexes (S & P 500) and others.

Conclusions

Thus, the model stress testing reveals how financial stability at the front of forecasts and provides an understanding of the possible vulnerability. Although extreme events can not be predicted, study their impact on the effectiveness of the organization strengthens the understanding of the situation.