Stress Testing

Stress and Scenario Testing – CCAR/DFAST

Prior credit crises and other periods of market chaos have proven time and again that all predictive models have weaknesses. Often the potential failures are hard to spot in isolation and leave institutions vulnerable to large, unanticipated losses and capital shortfalls. Institutions have long used scenario analysis to try to understand where their models might fail and have added regular stress testing to their arsenal of risk management tools. Regulators around the world have also stepped up demands for stress testing in new and frequently changing requirements. The processes can be tedious, costly and slow, leaving risk teams scrambling to keep up with internal and external demands.

Fully Integrated Stress Testing Meets All Regulatory Requirements

Kamakura offers a comprehensive suite of managed services and will co-ordinate and execute supervisory stress tests, from data capture and model calibration to scenario generation and interpretation of outputs supplementing the work of internal bank personnel.

Kamakura’s expertise in loss modelling and stress testing leverages three longstanding Kamakura business lines:

  • Enterprise Risk Management software
  • Outsourcing of risk management services
  • Default model research and development

Kamakura default models predate the regulatory stress test scenarios by more than a decade and have been continuously tested, re-tested, and refined over that time.

Kamakura offers public and private firms models which can produce loss estimates for:

  • Commercial Real Estate
  • Commercial & Industrial Loans
  • Mortgage Loans
  • Consumer Lending
  • Credit Cards

Kamakura’s Stress Testing is scalable to easily accommodate changes to the regulations, balance sheet changes, changes to the risk factor sets, and indeed go well above the standard regulatory requirements outlined. The regulatory risk factors are incorporated into the models and can be changed easily with just a button-click.

CCAR / DFAST Reporting

The Kamakura CCAR/DFAST stress testing solution offers comprehensive regulatory reporting based on provided templates. These are automatically populated based on the stress tests that are run and can be directly presented to the regulators. Kamakura provides a framework that easily and automatically creates and submits FR Y-14, FR Y-16 and DFAST reports, and the means to provide a totally transparent audit trail of the entire process as part of one integrated system, ensuring compliance.

In addition to compliant reports, the system clearly and quickly provides comprehensive audit trails of every item in regulatory submissions for use with regulators, auditors, board members and other stakeholders. Drill-down and drill-across functionality allows you to easily zoom in on key points for a greater level of detail.

Kamakura’s Integrated Risk Solution

Kamakura Risk Manager (KRM) completely integrates credit portfolio management, market risk management, asset and liability management, Basel II and other capital allocation technologies, transfer pricing, and performance measurement. KRM uses a solid analytical foundation for valuation, pricing, and hedging of a wide range of equity securities, fixed income securities, foreign exchange contracts. KRM also delivers an unmatched list of derivatives and exotics.

In addition to the powerful KRM platform, Kamakura Risk Information Services (KRIS) provides extensive risk information on credit risk and interest rates. Credit risk information in KRIS includes default probabilities, default correlations, implied spreads and implied ratings for a wide range of counterparties. KRIS is seamlessly integrated into the KRM platform to fully incorporate the credit risk information into all KRM analyses.