Abstracts Category : Other

Development and evaluation of stress tests : Utilizing stress tests to complement the current ex-ante analysis at Second Swedish National Pension Fund

by Andreas Antonsen berg

Stress tests are on a regular basis mentioned on the financial markets where some institutions have to perform it as a regulatory requirement and others have it as an optional way to complement their predictions. Stress tests are used to see how robust a financial instrument or a portfolio are in various scenarios. The challenge is to construct a stress test that is sufficiently extreme, while it is still plausible. The objective of this work is to study various stress testing methods that can be applied at Second Swedish National Pension Fund (AP2) associated with their prediction of market risks. Two different methods are implemented with various scenarios and thus unique analyzes are performed for each method. Hence, the methods are not compared against each other, but each method is analyzed individually with the advantages and disadvantages based on the choice of method and type of scenarios. The results of the first method, historical stress test, shows that the stressed portfolio would decrease in value under the specified scenario. For the second method, coherent stress test, the results vary for the different scenarios. P den finansiella marknaden frekommer termen stresstester med jmna mellanrum, dr vissa institutioner har det som krav och andra har det som ett frivilligt stt att komplettera prediktioner. Stresstester anvnds fr att mta hur robust ett finansiellt instrument eller en portflj r i olika scenarion, dr utmaningen blir att konstruera ett stresstest som r relevant och tillrckligt extremt. Mlet med arbetet r att studera olika stresstestmetoder som ska kunna bli tillmpade hos Andra AP-fonden (AP2) i samband med deras prediktion av marknadsrisker. Tv olika metoder implementeras med olika scenarion och sledes utfrs unika analyser fr respektive metod. Drav jmfrs inte metoderna mot varandra utan varje metod analyseras individuellt med fr- och nackdelar utifrn valet av metod och typen av scenarion. Resultatet fr den frsta metoden, historiskt stresstest, pvisar att portfljen som stressas skulle minska i vrde under det specificerade scenariot. Fr den andra metoden, koherent stresstest, varierar resultatet fr de olika scenarierna.