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OFR Working Paper – Stress Tests to Promote Financial Stability

Stress Tests to Promote Financial Stability: Assessing Progress and Looking to the Future – Rick Bookstaber, Jill Cetina, Greg Feldberg, Mark Flood, Paul Glasserman, July 18, 2018

“Stress testing, which has its roots in risk management, should be adapted to support financial stability monitoring and to  incorporate the interconnections and dynamics of the financial system. Since the 2008 financial crisis, bank supervisors have honed their financial stability monitoring tools and significantly expanded the use of stress testing in the supervision of the largest  financial institutions. This article describes areas in which further research could contribute to the development of best practices in  stress testing and how bank supervisory stress tests can be made more useful for macroprudential supervision. We discuss both  near-term and longer-term objectives.”

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