WP No 86, 2013: Stress scenarios from the tails of historical distributions of macrofinancial risk factors in Denmark

Authors Abildgren, Kim
Subject Financial markets and financial stability; Financial stability
Type Working paper  
Year 2013
Published 11 November 2013
The paper puts the outcome during the most recent financial crisis in a historical perspective by taking a closer look at the frequency of extreme events in the economic history of Denmark, in some cases based on time series back to the late 1600s. We focus on the frequency distribution of a range of key macro-financial risk factors that are commonly believed to be important drivers of credit risks and market risks faced by financial institutions. We suggest that marginal historical distributions of macro-financial risk factors might serve as inspiration for design of sensitivity tests and "worst case" scenarios in risk management and macro stress tests.