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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Coherent Stress Testing

Would you like to change to the site? Based on choerent 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.


It constitutes a radical departure from the traditional statistical methodologies based on Economic Capital or Extreme-Value-Theory approaches. The book is split into four parts.

Part I looks at stress testing and at its role in modern risk management. It discusses the distinctions between risk and uncertainty, the different types of probability that are used in risk management today and for which tasks they are best used. Stress testing is positioned as a bridge between the statistical areas where VaR can be effective and the domain of total Keynesian uncertainty.

Part II lays down the quantitative foundations for the concepts described in the rest of the book. Part III takes readers through the application of the tools discussed in part II, and introduces two different systematic approaches to obtaining a coherent stress ocherent output that can satisfy the needs of industry users and regulators.

Coherent Stress Testing (Riccardo Rebonato) – book review

In part IV the author addresses more practical questions such as embedding the rehonato of the book into a viable governance structure. Request permission to reuse content from this site. Added to Your Shopping Cart. Description In Coherent Stress Testing: A Bayesian Approachindustry expert Riccardo Rebonato presents a groundbreaking new approach to this important but often undervalued part of the risk management toolkit.


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Table of contents Acknowledgements. I Data, Models and Reality. Marginal and Conditional Probabilities. A Very Important Link.

A Reasonable Starting Point. The Need for a Systematic Approach. Series The Wiley Finance Series.